SOCIALISM  M  EMPIRE 


DANGER 


BY 

COL.  ED.  F.  BROWNE 


THE  MOST  SERIOUS  QUESTION  PRESENTED    TO    THE    AMERICAN    PEOPLE 
SINCE  THE  ABOLISHMENT  OF    SLAVERY  IS    NOT  RE- 
CEIVING DUE  CONSIDERATION. 


THE  CONTROL  OR  REGULATION  OF  THE  EARNING  CAPACITY  OF  CAPITAL 

INVESTED  IN  PRIVATE  VENTURES  IS  A  REVOLUTION 

IN  OUR  FORM  OF  GOVERNMENT. 


THE    PRESENT    SOCIALISTIC    TENDENCY    TO    BUILD    UP    THE    EXECUTIVE 
POWER  CAN  ONLY  END  IN  ONE  OF  TWO  THINGS,  I.  E. ,  A  SO- 
CIALISTIC   TYRANNY    THROUGH    LEGISLATION, 
OR  AN   IMPERIATOR. 


Copyrighted  and   Published  by 

KLOPP  &  BARTLETT  COMPANY 

PRINTING    AND    STATIONERY 
OMAHA 


PREFACE. 


There  is  an  undercurrent  of  political  thought  today  in 
the  United  States,  which  drifts  toward  socialism,  and  this 
unconscious  drift,  leads  up  to  a  grant  of  power  to  our  Ex- 
ecutive Department  quite  necessary  under  a  socialistic  govern- 
ment, but  which  creates  a  danger  to  our  institutions.  Succes- 
sive grants  of  power  to  an  executive,  have  always  ended '  in 
Empire  with  Republics  of  the  past,  and  usually  the  additional 
power  has  been  given,  at  the  instance  of  the  "common  people". 
While  the  theory  of  socialism  is  a  beautiful  one,  human  nature 
must  be  changed  to  make  it  a  success.  There  are  two  well 
defined  classes  of  socialists.  The  educated  theorist  who 
claims  to  have  eliminated  greed  from  his  nature,  and  who 
prates  of  the  equality  of  man;  and  the  uneducated  socialist 
who  thinks  it  wrong  for  any  man  to  have  more  than  himself. 
The  Theorist  is  a  fraud,  and  should  be  watched  by  the  police, 
as  mild  forms  of  lunacy  soon  drift  to  violence.  His  only 
danger  is  in  injury  to  himself  and  the  advice  he  gives  others. 

It  is  but  a  step  from  the  theory  that  it  is  only  right  to 
work  entirely  for  the  public  good,  to  the  position  that  the 
public  should  receive  the  benefit  of  all  personal  endeavor. 

The  theoretical  socialist  talks  of  the  beauties  of  socialism 
from  the  stand  point  of  the  "giver",  while  his  ignorant  fol- 
lowers interpret  this  to  mean  that  the  public  should  have 
the  power  to  "take". 

The  unfortunate  thing  about  this  agitation  is  the  fact 
that  the  later  class  is  gaining  the  most  headway. 

This  under  current  of  thought  is  so  sweeping,  that  I  have 
been  surprised  in  conversation  with  Senators,  Congressmen 
and  Managing  Editors  of  several  of  our  great  dailies,  when  I 
have  suggested  that  this  agitation  was  a  tendency  toward 
socialism,  to  hear  the  expression,  "that  possibly  it  was  com- 
ing." 

If  public  men  and  great  newspapers  fear  to  attact  this 
argument  for  fear  of  loss  of  popularity,  a  political  question 


4  SOCIALISM    OR    EMPIRE. 

more  vital  to  our  future  prosperity  than  any  which  has  been 
presented  since  the  abolition  of  slavery,  may  not  receive  proper 
consideration. 

There  is  no  doubt  but  that  this  socialistic  tendency  is 
gainirig  strength  and  that  the  disposition  on  the  part  of  the 
public  to  take  power  not  consistent  with  true  political  economy 
is  growing. 

Weak  men  and  designing  politicians  are  accepting  part 
of  the  theories  of  socialism  either  because  they  know  no  better, 
or  they  desire  to  take  advantage  of  the  political  agitation 
for  personal  ends.  The  United  States  has  become  the  leader 
of  nations  in  a  business  way  by  following  ideas  the  antithesis 
of  socialism.  Our  constitution  was  framed  with  the  credit- 
able object  of  allowing  absolute  freedom  in  business  conduct, 
and  our  great  prosperity  has  come  about  through  bright 
minds  being  able  to  reap  benefits  here  not  attainable  else- 
where, and  it  was  intended  that  every  one  who  had  a  busi- 
iness  should  attend  to  it  and  let  other  people  alone . 

The  Socialistic  trend  of  thought  now  creates  a  demand 
that  the  form  of  "negative"  laws  which  have  controlled  our 
action  in  the  past,  shall  be  supplanted  with  an  initiative  con- 
trol on  the  part  of  the  government  over  great  business  ventures, 
owned  and  operated  by  private  citizens. 

The  demand  that  the  "public "should  control,  regulate, 
and  investigate  everything  and  every  body,  who  is  making 
money,  with  a  view  of  seizing  any  profit  over  and  above  a 
rate  of  interest  that  they  (the  public)  think  fair,  is  only 
the  worst  form  of  socialism. 

This  element  desires  the  passage  of  laws  with  a  view  of 
eliminating  all  the  speculative  benefits  to  capital,  which  have 
rushed  the  business  of  the  country  ahead  of  all  others. 

This  speculative  inducement  has  brought  to  our  shores 
the  brightest  minds  of  Europe,  and  our  country  has  receievd 
the  benefit  of  the  endeavor  of  such  men  as  Erickson,  Carnegie, 
and  thousands  of  other  foreigners,  who  while  making  money 
themselves  assisted  many  others  and  have  been  important 
factors  in  our  rapid  advance.  The  dominant  idea  of  the 
founders  of  our  nation,  was  to  restrain  the  government  from 
interfering  or  competing  with  private  endeavor,  because  the 
colonies  rebelled  against  that  form  of  paternalism. 

The  clamor  in  some  quarters  that  the  public  should  own 


PREFACE.  5 

utilities,  and  that  the  government  should  regulate  and  con- 
trol insurance,  railroads,  trusts,  and  other  great  private 
business  ventures  is  nothing  more  or  less  than  socialism,  which 
would  undoubtedly  end  in  Despotism  or  Empire. 

It  cannot  be  that  the  American  People  wish  to  change 
our  form  of  government  and  these  recommendations  mean  a 
change  so  radical,  that  we  would  place  back  in  the  hands  of 
an  executive  of  our  own  selection  a  power  we  took  away  from 
the  executive  by  the  war  of  the  Revolution. 

We  are  asked  to  place  in  the  hands  of  our  executive 
department,  the  power  claimed  by  kings  and  Emperors,  and  to 
give  to  our  executive  officers  the  same  form  of  control  over 
business  affairs  from  which  we  released  ourselves  by  that  long 
and  bloody  struggle. 

Any  interference  with  the  management  of  private  business 
on  the  part  of  government  is  a  form  of  despotism  and  there 
is  but  little  difference  between  a  socialistic  tyranny  and  an 
Empire.  In  fact  business  interests  would  be  safer  under  an 
Empire  than  under  a  dictator  governed  by  the  whims  of 
irresponsible  agitators. 

The  idea  of  the  government ' '  doing  things' '  has  grown  very 
rapidly  and  the  evident  willingness  on  the  part  of  our  lower 
branch  of  congress  to  tiirn  over  to  the  executive  every  power 
requested,  is  quite  in  line  with  the  history  of  Republics  which 
have  merged  into  Empire. 

The  lower  branch  of  congress  (The  peoples  representa- 
tives) has  already  built  up  the  power  of  the  executive  de- 
partment to  such  an  extent  that  the  congress  itself  is  fast 
losing  its  independence  and  were  it  not  for  the  Senate  our 
political  institutions  would  be  in  danger.  But  this  semi- 
socialistic  agitation  proposes  to  give  more  and  more  power 
to  the  Executive  and  all  of  the  reforms  now  apparently  so 
popular,  are  pointing  to  a  change  in  the  form  of  government 
laid  down  by  our  Fathers. 

In  Monarchies  or  Empires  the  people  have  not  the  con- 
stitutional protection  from  inquisition,  control  and  regulation, 
which  we  possess,  and  this  has  been  our  greatest  freedom. 

My  object  in  writing  this  book  is  to  show  the  danger  of 
departing  from  the  written  constitution  in  these  matters, 
and  to  show  that  in  no  instance  where  government  interferes 
with  business  conditions  are  the  "people"  benefited. 


6  SOCIALISM  OR  EMPIRE. 

This  agitation  in  favor  of  the  government,  state  or 
municipality  taking  control  of  business  ventures  or  regulating 
them  except  through  "negative"  laws  is  Unamerican  and 
wrong.  It  is  but  the  froth  escaping  from  the  seething  pot  of 
socialism,  which  if  not  cooled  by  reason  will  boil  over  and 
put  out  the  fires  of  prosperity. 


SUMMARY  OF  CONTENTS. 


SUMMARY  OF  CONTENTS. 


CHAPTER  I. 
THE  OBJECTS  DESIRED  BY  THE  FOUNDERS  OF  THE  UNION. 

Separation  from  England  result  of  unequal  and  unjust  taxation,  business 
restriction  and  regulation,  and  undue  investigation  of  the  private  business 
affairs  of  citizens.  Instructions  of  the  delegates  sent  to  the  Continental 
Congress,  all  indicate  business  unrest.  War  declared  July  6th,  1775,  over 
these  business  conditions.  The  business  freedom  demanded  by  the  colonies 
not  granted  in  a  monarchy  or  empire.  Refusal  of  Parliament  to  consider 
requests  ended  in  political  freedom  being  declared  July  4th,  1776,  one 
year  after  the  war  commenced.  An  effort  made  to  establish  a  government 
giving  private  incentive  freedom  from  government  control. 

CHAPTER  II. 
CONSTITUTIONAL  PROVISIONS. 

Framers  of  Constitution  fully  alive  to  the  dangers  of  paternal  or  monarchial 
government  control.  Tried  to  frame  an  Instrument  taking  away  from 
the  Executive  any  discretionary  powers.  Explicit  instructions  to  live  up 
to  the  written  language  of  the  document.  Limitations  of  authority  on 
the  part  of  congress  and  the  Executive  more  strongly  put  than  permissions 
granted.  Successive  amendments  continue  to  guard  the  business  inter- 
ests from  encroachment  of  the  legislative  and  executive  branches  of  the 
government.  The  business  freedom  is  what  has  made  this  nation  great. 
Do  the  people  want  to  turn  back  to  the  government  the  power  taken  to 
themselves  by  the  War  of  the  Revolution. 

CHAPTER  III. 
INDIVIDUAL  RIGHTS  IN  VARIOUS  COUNTRIES. 

The  United  States  today  the  only  nation  with  constitutional  guarantees 
for  the  individual.  The  only  nation  having  a  court  created  by  constitu- 
tional provisions.  Courts  are  a  co-ordinate  branch  of  government  in  this 
and  in  no  other  country.  Can  interpose  in  behalf  of  the  people  against 
legislative  or  executive  action.  Courts  are  creation  of  statute  in  other 
countries.  Liberties  of  people  in  Europe  usually  lie  with  the  legislative 
branch,  no  constitutional  guaranties.  What  would  be  legal  and  proper 
in  Europe  would  be  a  violation  of  our  constitutional  rights.  No  protection 
in  Europe  against  actions  of  the  government.  The  citizens  of  France  have 


8  SOCIALISM  OR  EMPIRE. 

no  rights  whatever  as  against  the  government.  While  the  government 
can  interfere  in  any  way  it  chooses  with  business  in  Europe  we  are  protected 
from  such  interference  in  this  country. 

CHAPTER  IV. 
DANGER  IN  ATTEMPT  TO  "GET  AROUND  THE  CONSTITUTION." 

Business  control  by  government  merely  result  of  socialistic  agitation  and 
executive  ambition.  Such  a  control  necessarily  builds  up  and  gives  power 
to  an  executive  not  intended.  Careless  legislators  have  already  allowed 
executive  encroachments  creating  a  danger.  The  greatest  danger  to  a 
republic  is  executive  "initiative"  power,  and  hysterical  action  on  the  part 
of  the  people.  A  control  of  great  business  ventures  makes  our  executive 
department  too  dominant  a  factor.  The  changes  at  present  suggested, 
a  revolution  in  our  form  of  government.  Caesar  and  Napolean  first  sug- 
gested immaterial  infractions  of  the  constitution,  then  tore  the  constitution 
to  pieces.  Empire,  the  logical  result  of  increased  executive  power. 
Roman  agitators  built  up  the  executive  power  to  assist  Pompius  but 
Caesar  reaped  the  benefit.  Should  we  give  executive  power  to  our  Presi- 
dent that  we  would  fear  in  another's  hands — Franklin's  prophecy. 

CHAPTER  V. 

PANAMA  CANAL. 

Extraordinary  carelessness  of  Congress  in  managing  this  affair.  Practic- 
ally turning  the  whole  thing  over  to  the  Executive  department.  American 
Contractors  should  do  this  work.  Excessive  cost  of  excavation,  and  prob- 
able further  loss.  Useless  expenditures  greater  than  that  for  practical 
purposes.  Executive  department  not  fitted  for  business  operation.  Every 
principle  of  American  government  violated  in  Panama.  The  Panama 
dollar  arrangement.  Congress  should  not  shirk  its  duty  in  this  transaction. 

CHAPTER  VI. 
PANAMA  R.  R.  AND  STEAMSHIPS. 

An  apparent  attempt  to  prove  theories  of  socialism  or  Empire  in  govern 
ment.  Purchase  of  railroads  an  expensive  mistake.  A  poor  investment 
handled  in  an  extravagant  manner.  Excessive  charges  do  not  create 
profit.  Purchase  of  steamer  line  which  has  cost  more  for  repairs  than 
original  investment.  Government  making  contracts  with  foreign  lines 
of  steamers  with  a  view  of  running  an  American  line  out  of  business.  Cost- 
ly experiment  in  transportation  in  which  the  people  will  stand  the  loss. 
Government  Panama  line  of  steamers  and  Philippine  transports  would 
save  money  in  ten  years  time  if  at  the  bottom  of  the  sea.  Other  nations 
subsidize  lines  of  steamers  while  ours  try  to  drive  them  out  of  business. 
Repugnant  to  our  ideas  of  government  to  allow  this  to  continue. 

CHAPTER  VII. 

RATE  REGULATION. 

This  is  the  first  definite  attempt  to  place  in  the  hands  of  the  executive 
department,  the  power  taken  from  government  by  the  war  of  the  Revolu- 


SUMMARY  OF  CONTENTS.  9 

tion.  It  is  so  important  that  it  should  be  clearly  understood.  Worked 
up  demand  for  the  law  by  a  branch  of  the  Executive  department.  Reasons 
for  creating  an  Inter  State  Commerce  Commission.  The  Commission  a 
failure.  They  charge  the  courts  with  unfair  decisions.  Secure  the  as- 
sistance of  the  President  through  manufactured  Public  Opinion  and  de- 
ceit. Congress  subservient  to  Executive  through  their  own  action  in  grant- 
ing executive  power.  Getting  around  the  Constitution  a  dangerous  pre- 
cedent. 

CHAPTER  VIII. 

THE  POWER  REQUESTED  BY  THE  COMMISSION  AND  THE  PRES- 
IDENT. 

The  power  to  name  a  reasonable  rate  according  to  their  views  and  enforce 
it.  The  ablest  men  ever  on  the  Commission  declared  it  impracticable. 
President  impresses  on  Congress  that  it  should  give  the  executive  depart- 
ment initiative  control  over  great  corporations.  Says  if  power  to  regulate 
does  not  allow  congress  to  do  so,  the  constitution  should  be  changed.  Says 
it  is  only  an  "innovation  in  form"  when  in  fact  it  is  a  revolution.  Nearly 
every  power  requested  is  an  unconstitutional  one.  Negative  laws  within 
power  of  congress,  affirmative  laws  prohibited.  Executive  of  an  Empire, 
Monarchy  or  Social  Tyranny  assume  this  power  but  it  is  our  "freedom." 

CHAPTER  IX. 
SOME  COMPARISONS. 

Unfair  presentation  of  this  matter  to  the  Congress  and  people.  Compari- 
son of  cost  of  carrying  freight  in  all  the  great  business  countries  of  the  world. 
Comparison  of  wages  paid  railroad  men  in  England  and  United  States. 
Private  incentive  and  competition  enables  this  country  to  out  do  all  others 
in  railroad  transportation.  Carrying  freight  for  one  third  and  one  half 
what  any  other  country  charges  and  paying  two  to  three  times  the  wages. 
Government  control  prevents  all  competition.  The  "initiative"  control 
of  government  in  those  countries  the  prime  cause  of  our  ascendency.  Will 
it  ever  come  that  the  people  desire  a  change. 

CHAPTER  X. 
VOLUME  OF  TRAFFIC. 

The  importance  of  maintaining  volume  of  traffic  for  purposes  of  cheap 
transportation.  Constructive  centers  or  "basing  points'  and  their  import- 
ance. Change  of  ideas  of  transportation  in  the  last  35  years.  Distribution 
of  volume  of  traffic  would  oblige  higher  rates  to  constructive  centers.  Mil- 
waukee man's  dream,  basis  of  most  of  complaints  heard.  Mr.  Sibley  ex- 
plains results  of  local  jealousies. 

CHAPTER  XL 

BENEFIT  OF  PARTIAL  ELIMINATIONS  OF  DISTANCE   IN   CON- 
JUNCTION WITH  VOLUME  OF  TRAFFIC. 

Some  railroads  were  constructed  to  assist  localities.  In  construction  of 
volume  of  traffic,  distance  is  not  the  material  factor.  Constructed  lines 


10  SOCIALISM  OR  EMPIRE. 

of  heavy  volumes  of  traffic  enables  world  wide  competition.  The  reasons 
for  the  difference  in  rates  in  Wisconsin  and  Iowa  explained.  Demonstra- 
tion of  cost  of  operation  on  different  sections  of  the  Pennsylvania  railroad. 
Value  of  our  freedom  in  rate  manipulation  to  whole  country.  General 
distribution  of  commodities  a  check  on  extortion.  Regulation  jbyflgovern- 
ment  must  consider  distance  and  locality. 

CHAPTER  XII. 
WHAT  is  A  "REASONABLE"  RATE? 

Is  the  rate  charged  on  the  Panama  R.  R.  or  the  English  roads  reasonable? 
Should  the  Lake  Shore  be  obliged  to  advance  their  rate  to  a  reasonable 
figure?  Nearly  every  road  has  conditions  to  be  considered.  Grades, 
distance  and  volume  of  traffic,  and  the  latter  the  most  important.  Rates 
based  on  present  average  in  United  States  would  bankrupt  half  of  our 
railroads.  A  commission  could  ruin  one  section  and  build  up  another 
with  a  "reasonable"  rate.  Some  low  rates  necessary  to  return  empty  cars. 
Shall  a  government  "board"  investigate  private  books?  Some  of  the  pro- 
visions of  the  bill  passed  by  congress  considered.  The  thirty  day  notice 
not  a  business  proposition. 

CHAPTER  XIII. 
LONG  AND  SHORT  HAUL  AND  SPECIAL  RATES. 

Impracticability  of  the  long  and  short  haul  law  as  passed.  Impracticabili- 
ty recognized  by  the  Inter  State  Commerce  Commission  and  courts.  Some 
examples::  Special  rates  a  necessity  at  times  in  proper  conduct  of  busi- 
ness. Wholesale  sale  of  transportation  recognized  in  every  other  country. 
The  anti-pooling  law  alone  could  correct  all  of  our  transportation  trouble 
if  enforced.  Senator  Sherman  placed  the  only  /'reform"  law  on  the  stat- 
ute books  regarding  business  regulation  which^ shows  statesmanship. 

CHAPTER  XIV. 
WATERED  STOCK. 

The  Inter  State  Commerce  Commission  and  the  President  appear  to  think 
there  is  much  watered  stock.  Preisdent  suggests  that  it  be  eliminated 
from  calculation  in  determining  a  fair  charge  for  service.  The  Inter  State 
Commerce  Commission  statistician  destroys  his  own  figures  on  railroad 
values.  Reorganization  and  reconstruction  has  used  up  most  of  surplus 
of  capitalization.  Balance  more  than  covered  by  appreciation  of  right 
of  way  and  land  purchased.  Should  the  values  be  taxed,  and  not  allowed 
to  earn  dividends?  The  talk  about  watered  stock  in  railroad  property 
is  usually  from  uninformed  men.  Senator  Tillman's  authority  rather  weak 
when  investigated.  Comparisons  of  Railroad  Capitalization  all  over  the 
world. 

CHAPTER  XV. 
.STATE  RAILROAD  REGULATION. 

Public  safety  and  sanitation  proper  province  of  State  "Legislatures.  After 
giving  charters  to  corporations  granting  authority  to  operate  the  charter 


SUMMARY  OF  CONTENTS.  11 

becomes  a  contract.  If  it  did  not  express  that  rate  regulation  would  be 
attempted,  state  has  no  right.  Charter  in  certain  states  provide  for  this 
regulation,  others  do  not.  After  ten  thousand  million  dollars  has  been 
expended  too  late  to  change  terms  of  contract.  Money  worth  from  7  to 
10  per  cent  at  time  of  great  railroad  construction.  It  would  be  seizure 
of  property  to  now  demand  acceptance  of  4  to  5  per  cent  on  investment. 
In  regulative  laws  passed  by  state,  where  power  is  given  a  "board"  to  act, 
the  law  is  unconstitutional.  Illinois,  Ohio,  Kansas  and  Texas  all  have 
gone  beyond  their  power  in  rate  regulation  already.  The  impracticability 
of^a  general  two  cent  rate  for  passenger  service. 

CHAPTER  XVI. 
CANADIAN  RAILROADS 

Complete  control  of  Canadian  Railroads  by  a  Commission.  Commission 
can  do  about  anything  they  want  to  except  allow  a  pool.  One  third  of  the 
money  used  in  construction  of  Canadian  Railroads  furnished  by  government. 
No  representation  on  boards  of  directors  and  commission  naturally  should 
have  extraordinary  power.  Canadian  railroads  are  allowed  to  d'o  about 
everything  we  don't  want  done.  Canada's  investment  in  railroads  a  poor 
one.  Government  operation  loses  money.  Their  commission  is  part  of  the 
executive  staff  and  represents  a  line  of  succession  from  a  king.  They  can 
override  the  Courts,  the  railroads  and  the  people  and  are  only  subject  to  the 
ministry,  who  are  the  king's  representatives.  Our  railroads  pay  taxes  and 
the  people  of  Canada  are  taxed  to  support  the  railroads.  The  difference 
between  an  Imperial  executive  and  one  who  executes  the  laws  of  the  people. 
This  difference  is  what  constitutes  our  freedom. 

CHAPTER  XVII. 
ENGLISH  RAILWAYS. 

Development  of  English  Railways  and  forms  of  service.  Board  of  trade 
part  of  King's  executive  staff.  President  of  Board  of  Trade  a  cabinet 
officer.  How  the  Board  of  Trade  assumes  to  name  maximum  rates.  Average 
maximum  rates  named,  and  peculiar  exceptions.  Special  rate  allowed,  and 
lower  rates  on  large  shipments.  Reasons  for  high  rates  in  England  showing 
danger  of  government  control.  No  competition  and  no  object  in  perfecting 
freight  transportation.  Eighteen  per  cent  reduction  in  tariff  in  United 
States  while  English  rates  stay  steady.  Comparison  between  the  London 
&  Northwestern  and  two  American  roads.  Passengers  carried  cheaper  in 
England,  but  freight  charges  three  times  as  high  as  in  the  United  States. 
English  maximum  rates  would  appear  ridiculous  in  the  United  States. 

CHAPTER  XVIII. 
FRENCH  RAILROADS, 

French  railroads  planned  as  an  adjunct  to  Imperial  government.  Govern- 
ment owns  right  of  way  and  companies  the  superstructure.  Few  of  them 
are  a  success,  and  peculiar  position  of  government  today.  Minister  of  Rail- 
ways regulates  tariffs  so  a  s  not  to  interfere  with  state  owned  canals.  Result 
in  an  average  rate  per  ton  per  mile  of  about  twice  what  is  paid  in  the  United 
States.  Railroad  system  built  to  centralize  population.  Rivers  and  canals 
are  controling  factors  in  rate  making  in  France.  No  comprehensive  freight 
traffic  lines  in  France  or  competition  allowed. 


12  SOCIALISM  OR  EMPIRE. 

CHAPTER  XIX. 
GERMAN  RAILWAYS. 

The  way  Germany  obtained  her  railroads.  Promise  of  profit  division  with 
the  people  at  time  of  purchase  not  fulfilled.  Roads  at  times  have  paid 
over  seven  per  cent  on  money  and  no  reduction  of  tariff  made.  While 
our  rates  have  decreased  18  per  cent  Germany  only  reduced  5  per  cent. 
Today  Germany  charges  an  average  of  1.253  cents  per  ton  per  mile,  United 
States  0.76  cents.  The  great  industrial  improvement  in  Germany  of  late 
years  made  possible  by  water  navigation.  Railroads  used  as  rebaters  to 
exporters,  and  assistant  to  protective  tariffs  on  imports.  Object  in  rail- 
road rate  making  to  "decentralize"  industry  and  check  the  growth  of  large 
cities.  Result  is  complete  localization  of  freight  traffic,  and  necessary 
expense  of  operation.  Railroads  of  Germany  merely  feeders  to  canals  and 
rivers.  Sixty-three  per  cent  of  freight  moved  is  on  special  rates.  Rebates 
given  large  shippers.  Products  of  one  section  of  Empire  not  allowed  to 
compete  in  markets  of  another  section.  Local  jealousy  carried  to  extremes 
and  recognized  by  government. 

CHAPTER  XX. 

GERMAN  RAILWAYS  (Continued) 

Germany's  hard  and  fast  rule  of  fairness  to  locality  impracticable  in  the 
United  States.  Not  public  policy  in  Germany  to  transport  long  distances 
by  rail.  Their  lowest  rates  but  little  below  the  average  charged  in  the 
United  States.  The  jealousies  of  locality  prohibitive  of  greater  transporta- 
tion problem.  Comparative  results  of  government  recognizing  local  com- 
plaints in  the  United  States.  Unelasticity  of  government  rates  complete 
estopal  of  business  advantages.  Germany's  policy  would  destroy  the 
western  farmer  and  close  up  many  of  our  furnaces.  Even  socialists  should 
follow  out  government  control  to  its  logical  conclusion. 

CHAPTER  XXI. 
.THE  RAILWAYS  OF  AUSTRIA-HUNGARY. 

Unfortunate  investment  in  railroads.  Localization  of  Traffic  and  feeders 
to  waterways.  Charge  1.32  to  1.35  cents  per  ton  per  mile  against  0.76  in 
United  States.  The  Zone  system  a  failure  and  never  was  a  success.  Only 
one  principle  applied  without  "basing  points"  for  accumulation  of  traffic. 
Great  opening  for  a  private  controlled  railroad  system  in  Europe.  Imprac- 
ticable under  government  control.  Bohemia  would  have  a  great  future 
with  business  condition  sand  competitive  rates.  A  private  owned  and  man- 
aged railroad  across  Europe  would  save  from  7  to  10  per  cent  of  primary 
value  to  all  producers  and  create  wealth.  As  it  is  there  is  a  scramble  to 
leave  the  country  by  its  poverty  stricken  inhabitants. 

CHAPTER  XXII. 
RUSSIAN  RAILROADS. 

Same  condition  in  Russia  as  United  States  in  1836.  United  States  a  net 
work  of  railroads  brought  into  use  by  competition  and  private  incentive. 
Russia's  struggling  lines  representing  unprofitable  investments.  Sectional 


SUMMARY  OF  CONTENTS.  13 

jealousies  prohibit  comprehensive  traffic  arrangements  by  government. 
River  Volga  practically  divides  interior  trade  of  Russia.  Central  Russia 
remains  agrarian  while  the  central  United  States  most  prosperous  section 
of  the  world;  through  diversified  interests.  Even  Autocratic  government 
must  recognize  claims  of  locality  in  rate  regulation. 

CHAPTER  XXIII. 
ITALY,  SWITZERLAND  AND  SMALLER  EUROPEAN  STATES. 

Mileage  of  smaller  European  nations  and  how  owned ;  Italy's  failure  to  suc- 
cessfully own  or  operate  railroads;  Localization  of  Traffic  prevents  low  rates 
and  the  charge  is  from  1.60  to  1.64  cents  per  ton  per  mile.  No  hope  of 
much  decrease  in  tariff.  Belgium  lowest  passenger  fare  in  the  World  but 
freight  charges  56  per  cent  higher  than  in  the  United  States.  The  reason 
low  passenger  fare  pays  in  Belgium.  Switzerland's  experiment  in  public 
ownership  too  new  to  'determine  results.  No  cheaper  freight  service  pos- 
sible however,  under  conditions.  Certain  end  of  all  competition  by  govern- 
ment ownership.  Switzerland  expects  to  "live  off  the  tourists"  and  if 
successful  the  people  will  make  money  in  Railroad  ventures.  Cheap  pas- 
senger fares  are  deceiving  as  8  tons  of  freight  is  carried  for  each  passenger. 

CHAPTER  XXIV. 
AUSTRALIAN  AND  NEW  ZEALAND  RAILWAYS. 

Semi-Socialistic  government  in  Australia  dominated  by  agitators.  Diffi- 
cxilty  in  operation  of  government  controled  railroads.  Rates  made  on 
zone  system  without  establishing  trade  centers.  Result  all  manufacturing 
or  trade  is  centered  at  sea  port  cities.  Losses  in  operation  covered  up  by 
increases  of  capital.  Glaring  misstatements  in  government  reports.  No 
interior  towns  are  able  to  compete  on  account  of  Zone  rates  and  political 
jealousies.  Private  owned  roads  would  have  created  half  a  dozen  great 
trade  centers  in  the  interior.  New  Zealand's  cheap  passenger  fares  de- 
ceive the  people  by  allowing  excessive  freight  charges.  Local  jealoxtsies 
prevent  railroad  competition  or  decent  connection.  Localizing  traffic 
assists  socialistic  communities  but  destorys  railroads  for  true  commercial  pur- 
poses. Enormous  debt  and  high  rents  the  natural  result.  New  Zealand's 
socialism  a  mild  form  of  slavery.  Poverty  of  the  country  in  comparison 
with  the  United  States. 

CHAPTER  XXV. 
RAILROADS  IN  INDIA,  AFRICA,  THE  PHILIPPINES  AND  JAPAN. 

Extent  of  the  system  in  British  India.  No  competition,  rates  pooled  and 
inflexible,  no  change  of  importance  in  15  years.  Only  competition  is  be- 
tween sea  lines  and  ports  in  connection.  Delphi  a  constructive  center 
or  basing  point  relatively  same  distance  inland  as  Chicago.  Lowest  charge 
for  freight  on  any  government  controlled  railroad  0.85  cents  per  ton  per 
mile  against  0.76  in  United  States.  Grain  carried  for  less  than  coal  owing 
to  American  competition.  Low  rates  entirely  brought  about  by  cheap 
labor.  Rates  ana:  wages  given.  Commission  recommends  sale  of  state 
owned  railroads.  Africa  railroads  adjuncts  to  national  control.  Profit 
not  considered..  -  United  States  following  this  line  in  the  Philippines . 


14  SOCIALISM  OR  EMPIRE. 

It  is  un-American  and  should  be  stopped.  If  American  citizens  were  al- 
lowed to  control  and  appropriate  the  Islands  they  would  soon  pay  back 
their  cost.  Railroads  of  Japan  considered. 

CHAPTER  XXVI. 
MUNICIPAL  OWNERSHIP  OF  STREET  RAILROADS. 

The  movement  only  a  phase  of  socialistic  aggression.  The  legitimate  part 
played  by  the  municipalities  of  Boston,  New  York  and  Baltimore.  The 
Chicago  muddle.  Past  trouble  and  present  condition.  Ridiculous  as- 
sertion made  by  Mayor  and  Municipal  ownership  candidates  in  last  elec- 
tion. An  analysis  of  German  and  English  results  of  municipal  operation 
of  street  railroads.  The  cheap  fares  evidently  the  direct  result  of  employ- 
ment of  cheap  labor.  The  street  railroad  employes  of  those  countries  pay 
the  fare  for  the  public.  Prices  of  fares  and  wages  given  proving  this  fact 
Taxes  paid  and  speed  worth  the  difference  in  fare  paid.  Socialists  in  Aus- 
tralia hesitate  to  cut  down  wages  sufficiently  to  warrant  cheap  fares.  • 

CHAPTER  XXVII. 

GOVERNMENT  INSURANCE  CONTROL. 

Scandal  in  Insurance  management  caused  a  demand  by  socialists  that  gov- 
ernment take  hold.  Insurance  merely  a  form  of  speculation  attractive 
to  one  tenth  of  the  people.  Actuaries  f  gures  left  a  liberal  margin  and  the 
officers  participated  in  a  species  of  graft.  Companies  paid  all  obligations 
as  per  contract  with  policy  holders.  They  were  able  to  correct  these  abuses 
themselves.  It  was  none  of  the  government's  business.  Why  should 
government  look  after  the  life  insurance  speculators  interests  and  not 
"save  the  lambs"  in  Wall  Street.  Danger  of  rigid  rules  for  investment, 
and  laws  ordering  distribution  of  reserves.  Not  a  bond  in  existence  with- 
out a  Speculative  value.  This  agitation  appears  to  have  unsettled  seme 
of  our  executives.  Recommendations  made,  which,  if  followed,  will  bank- 
rupt several  companies  the  first  panic. 

CHAPTER  XXVIII. 
THE  POST  OFFICE  IN  BUSINESS. 

Post  office  supposed  to  be  a  self  supporting  institution  by  our  forefathers. 
Loss  in  operation  last  year  when  interest  on  investment  considered  20  to 
25  million  dollars.  Not  intended  that  buildings  should  be  constructed 
in  favored  localities.  No  "business"  should  be  attempted  in  ccrrr etition 
with  citizens.  Employes  should  be  under  local  control  instead  of  central 
government.  285,000  Post  office  employes  controlled  from  Washington 
unsafe.  Post  Masters  should  select,  employ  and  discharge  subordinates. 
Civil  Service  creates  an  office  holding  "class"  of  citizens  not  in  conformity 
with  our  institutions.  Parcels  post  to  run  express  companies  out  of  busi- 
ness. Money  order  transactions  competition  with  banks.  Not  intended 
that  our  government  would  compete  with  private  citizens.  Paternalism 
rampant  in  fraud  order  proceeding.  None  of  these  things  would  be  sup- 
ported by  the  people  if  left  to  a  vote. 


SUMMARY  OF  CONTENTS.  15 

CHAPTER  XXIX. 
TIMBER  AND  COAL  RESERVES. 

Origin  of  timber  reserve  movement.  Great  extent  of  reservations  made. 
Results  in  Colorado.  Cheaper  to  buy  lumber  from  Oregon  than  from  trees 
in  sight.  Sale  of  logs,  and  leases  to  cattlemen.  Misrepresentation  regard- 
ing conservation  of  water.  No  economic  principle  in  saving  for  future 
generation.  If  timber  and  coal  is  to  be  reserved  for  future  generations, 
why  not  land?  Coal  reservations  with  a  view  of  leasing  same  by  govern- 
ment, is  socialism.  Creating  a  form  of  "crown"  lands  in  the  United  States. 
The  mistake  in  the  Phillippines .  Timber  alone  in  the  Philippines  would 
pay  cost  of  Islands  in  five  years. 

CHAPTER  XXX. 
BANK  CONTROL  AND  CURRENCY  TINKERING. 

What  congress  was  authorized  to  do  in  the  way  of  making  money.  Emer- 
gency which  caused  introduction  of  a  currency  without  coin  as  reserve. 
Emergency  long  passed  and  change  not  perfected.  Currency  based  on 
bonds  not  a  logical  one  Tendency  of  government  to  enter  into  all 
grave  financial  transactions.  All  great  financiers  pronounce  our  currency 
system  illogical.  Coin  reserves  the  true  economic  base  for  currency  issue. 
Paper  inflation  has  followed  the  stoppage  of  silver  coinage.  Coin  the 
only  international  check  to  panic.  The  disappearance  of  Mexican,  Panama 
and  Phillippine  dollars  explained.  The  bank  should  issue  all  paper  cur- 
rency. The^  government  should  get  out  of  the  banking  business.  2> 

CHAPTER  XXXI. 
THE  TREASON  OF  THE  SENATE  (?) 

Unreasonable  attacks  upon  the  Senate.  The  objects  desired  by  its  creation. 
Senate  was  intended  to  protect  the  commercial  and  stockholding  class 
from  any  legislative  tyranny  attempted  by  Congress.  Recognized  that  the 
lower  house  would  in  time  be  possibly  controlled  by  the  laboring  and 
agrarian  classes.  Senate  was  an  intentional  check  upon  socialistic  or 
communistic  aggression,  if  it  interfered  with  property  rights.  Election  of 
Senators  by  the  people  would  remove  this  check,  which  has  been  one  of 
the  greatest  factors  in  creating  our  prosperity.  Legislative  tyranny  one 
of  the  most  dangerous  kind.  The  Senator  who  acknowledges  that  he  is 
representing  interests  antagonistic  to  the  commercial  interests  is  the 
"traitor."  Any  law  presented  by  the  representatives  ^of  the  people  so 
radical  that  it  is  not  susceptible  of  compromise  with  the  'business  interests 
should  not  pass.  Both  this  demand  and  the  "direct  primaries"  are  fol- 
lowing lines  of  socialistic  thought.  It  is  true  Democracy  (a  government  by 
a  mob,)  is  destructive  of  representative  government.  It  is  the  hope  of 
socialism,  but  it  is  the  political  road  to  anarchy. 

CONCLUSION. 


CHAPTER  I. 

THE  OBJECTS  DESIRED  BY  THE  FOUNDERS  OF  THE  UNION. 

The  incident  which  brought  about  the  establishment 
of  our  government  was  not  a  sudden  dissatisfaction 
with  conditions  existing,  between  the  mother  country  and 
the  colonies;  but  was  the  result  of  a  long  continued  con- 
troversy over  the  business  administration  of  the  colonies  and 
a  protest  against  its  continuance.  Plymouth  in  1636, 
Maryland  in  1650,  Massachusetts  in  1661,  Rhode  Island  in 
1663  and  Virginia  in  1691  sent  provincial  protests  to  the 
Crown  and  to  Parliament,  demanding  that  the  local  general 
assemblies  of  the  colonies  should  be  allowed  to  make  the  laws 
governing  the  payment  of  tax,  and  excise  and  duties. 

The  refusal  to  allow  the  establishment  of  manufactories, 
and  excessive  espionage  and  control  over  business  ventures 
through  license  permits  and  executive  regulations  were  felt 
to  be  an  outrage. 

As  early  as  1754  a  meeting  of  the  colonies  was  held  at 
Albany  through  the  influence  of  Massachusetts,  but  which 
was  not  attended  by  Virginia  or  North  or  South  Carolina 
and  its  protest  was  against  the  following  conditions: 

"That  the  acts  of  Parliament  in  laying  taxes  and  duties 
on  them  was  unfair  and  that  while  they  acknowledged  alle- 
giance to  the  King  they  claimed  interests,  rights  and  liberties 
as  natural  born  subjects  to  his  Majesty,  and  as  they  could  not 
be  represented  in  Parliament,  that  party  had  no  right  to 
impose  taxes  upon  them  without  consent." 

On  the  yth  of  October  1765  another  meeting  of  the 
representatives  of  the  colonies  was  held  in  New  York.  At  this 
meeting  Virginia,  North  and  South  Carolina  and  Delaware 
failed  to  attend,  and  another  protest  of  the  same  character 
was  made.  The  memorial  afterwards  was  signed  by  the 
colonies  not  attending,  but  these  petitions  were  void  of  results. 
Then  in  1774  on  September  5th  there  was  another  meeting 


18  SOCIALISM  OR  EMPIRE. 

of  the  delegates  chosen  or  appointed  by  the  several  colonies 
to  meet  in  Philadelphia  and  upon  their  assemblage  the  Con- 
tinental Congress  was  born.  Most  all  of  these  delegates  were 
instructed  by  resolution  passed  at  public  meetings,  or  by  the 
appointing  committee,  asking  the  delegates  to  obtain  certain 
results.  The  delegates  from  Massachusetts  Bay  were  em- 
powered by  the  House  of  Representatives  of  the  Colony"  to 
deliberate  and  determine  upon  wise  and  proper  measures 
and  among  other  things  to  secure  a  restoration  of  union  and 
harmony  "between  Great  Britain  and  the  Colonies."  The 
delegates  from  New  Hampshire  were  instructed  in  about  the 
same  way. 

The  delegates  from  the  province  of  Rhode  Island  and 
Providence  were  requested  to  obtain  the  repeal  of  the  ' '  several 
acts  of  the  British  Parliament  for  levying  taxes  upon  His 
Majesty's  subjects  in  America  without  their  consent  and 
particularly  an  act  lately  passed  blocking  up  the  port  of  Boston 
and  upon  proper  measures  to  establish  the  rights  and  liberties 
of  the  colonies  upon  a  just  and  solid  foundation"  and  these 
credentials  were  signed  by  John  Walton  Esq.,  the  Governor 
then  representing  the  King. 

The  delegates  from  the  colony  of  Virginia  were  appointed 
at  a  meeting  held  in  Williamsburg  and  the  resolution  passed 
unanimously  at  that  meeting  declared  "That  in  the  opinion 
of  this  meeting  it  will  be  highly  conducive  to  the  security  and 
happiness  of  the  British  Empire,  that  a  General  Congress  of 
deputies  from  all  the  Colonies  assemble  as  soon  as  the  nature 
of  their  situation  will  admit,  to  consider  the  most  proper  and 
effectual  manner  of  so  operating  on  the  commercial  connec- 
tion of  the  Colonies  with  the  mother  country  as  to  produce 
redress  for  the  much  injured  province  of  Massachusetts  Bay, 
to  secure  British  America  from  the  ravage  and  ruin  of  arbi- 
trary taxes,  etc." 

Deleware  specified  her  protests  as  follows :  ' '  taking  into 
our  most  serious  consideration  the  several  acts  of  the  British 
Parliament  for  restricting  manufacturies  in  His  Majesty's 
colonies  and  plantations  in  North  America;  for  taking  away 
the  property  of  the  colonists  without  their  participation  and 
consent ;  for  the  introduction  of  the  arbitrary  powers  of  excise 
into  customs  here;  for  making  of  all  revenue  causes  liable 
without  jury  and  under  the  decision  of  a  single  independent 


OBJECTS  DESIRED  BY  FOREFATHERS.  19 

judge;  for  trial  in  England  of  persons  accused  of  capital  crimes 
committed  in  the  colonies ;  for  shutting  up  the  port  of  Boston ; 
for  the  government  of  the  Massachusetts  Bay,  and  the  opera- 
tion of  the  same,  on  the  property,  liberty  and  lives  of  the 
Colonists,  etc." 

South  Carolina  at  a  "general  meeting  held  July  8th,  1774, 
of  the  inhabitants  of  this  colony,  they  having  under  the  con- 
sideration the  acts  of  Parliament  lately  passed  with  regard 
to  the  Port  of  Boston  and  Colony  of  Massachusetts  Bay,  as 
well  as  other  American  grievances"  appointed  delegates; 
"to  consider  the  Acts  lately  passed  and  bills  pending  in  Parlia- 
ment with  regard  to  the  Port  of  Boston,  which  acts  and  bills 
in  the  precedence  and  consequence  affect  the  whole  continent 
of  America;  also  the  grievances  under  which  America  labor 
by  reason  of  the  several  acts  of  Parliament  that  impose  taxes 
or  duties  for  raising  a  revenue  and  lay  unnecessary  restraint 
and  burdens  on  trade;  and  of  the  statutes,  Parliamentary 
Acts  and  Royal  instructions  which  make  an  invidious  dis- 
tinction between  his  Majesty's  subjects  in  Great  Britain  and 
America,  etc." 

This  congress  on  Friday,  October  i4th,  1774,  declared 
their  rights  in  substantially  the  following  language:  "After 
claiming  their  rights  as  citizens  they  said  that  by  emmigra- 
tion  they  had  not  forfeited,  surrendered  or  lost  any  of  the 
rights  of  free  and  natural  born  citizens  within  the  realm  of 
England;  that  they  were  entitled  to  a  free  and  exclusive 
power  of  legislation  in  their  own  provincial  legislature  and 
in  all  cases  of  taxation,  internal  policy  subject  only  to  the 
negation  of  their  sovereign;  the  right  under  the  common  law 
of  England  of  being  tried  by  their  peers;  the  benefit  of  such 
English  statutes  as  existed  at  the  time  of  their  colonization; 
the  right  to  petition  the  King  and  assemble  peacably;  pro- 
testing against  a  standing  army  in  the  colonies  in  times  of 
peace  without  the  colonies'  consent;  that  the  exercise  of  a 
legislative  power  by  a  council  appointed  by  the  King  was  a 
danger  and  destructive  of  American  freedom. 

On  October  26th,  1774,  an  address  was  given  by  this 
congress  to  the  inhabitants  of  Quebec,  not  asking  them  to 
commence  hostilities  against  a  common  sovereign,  but  in- 
viting them  ' '  to  not  suffer  themselves  to  be  intimidated  by 
infamous  ministers,  but  send  delegates  to  a  meeting  to  be 


20  SOCIALISM  OR  EMPIRE. 

held  in  Philadelphia  on  the  icth  of  May,  1775."  At  the 
meeting  of  this  continental  congress  on  July  6,  1775,  a 
practical  declaration  of  war  was  made  "not  for  conquest  or 
glory  but  for  rights  and  liberties,  for  the  defence  of  birthright 
and  property"  with  a  pledge  to  lay  down  their  arms  "when 
hostilities  shall  cease  on  the  part  of  the  aggressors,  and  all 
danger  of  their  being  renewed  and  not  before"  and  on  the 
same  day  this  congress  on  the  part  of  the  colonies  assured 
the  inhabitants  of  Great  Britian  that  their  movement  was 
not  aiming  at  independence ;  but  an  insistance  on  their  rights 
regarding  taxation  and  the  right  to  enter  into  profitable 
business  pursuits  even  though  it  would  prevent  the  colonies 
from  importing  manufactures  from  England,  and  also  claim- 
ing all  the  rights  granted  citizens  of  England. 

This  declaration  of  July  6th,  1775,  a  year  before  the 
declaration  of  independence  was  said  to  have  been  prepared 
by  John  Dickinson  of  Pennsylvania,  who  also  prepared  the 
address  to  the  King,  but  who  apparently  left  congress  rather 
than  sign  the  Declaration  of  Independence. 

It  will  be  noticed  by  the  form  of  protests  made  and  the 
expressions  used  at  the  meetings,  that  the  principal  com- 
plaint was  about  taxation. 

That  the  law  prohibiting  manufactures  in  the  colonies  was 
looked  upon  as  a  great  blow  at  their  prosperity  and  that  the 
restraints  and  burdens  on  trade  created  by  the  Acts  of  Parlia- 
ment were  looked  upon  as  an  interferance  with  private  rights 
of  citizens. 

The  protest  of  Massachusetts  which  ended  in  an  order  to 
close  the  Port  of  Boston  was  the  incident  that  brought  on  the 
revolution.  Stump  speakers  can  make  fine  talks  about 
freedom  of  speech  and  press.  There  was  but  little  inter- 
ference with  freedom  of  speech  and  less  of  the  press,  as  in 
those  days  the  press  was  not  much  of  a  factor  in  the  colonies. 
The  fact  remains  that  the  revolution  was  the  direct  result  of 
business  conditions,  and  that  in  the  war  which  separated  the 
colonies  from  England  the  declaration  of  war  was  clearly 
over  that  class  of  interference  and  that  it  was  declared  on 
July  6th,  1775,  while  our  Declaration  of  Independence  was 
made  on  July  4th,  1776,  a  year  after  the  war  commenced. 

Our  political  freedom  was  not  declared  until  nearly  a 
year  after  the  war  against  business  oppression  had  begun. 


OBJECTS  DESIRED  BY  FOREFATHERS.  21 

In  all  monarchies  there  is  more  or  less  restriction  and 
control  over  business  affairs  on  the  part  of  the  sovereign. 
The  license  to  do  business  in  Germany,  Russia  and  many 
other  countries  to-day  is  so  restrictive  that,  without  an  avowed 
friendship  to  the  policy  of  the  government,  it  would  be  im- 
possible to  do  business. 

Certain  classes  of  profitable  business  are  retained  by  the 
government  and  citizens  are  not  allowed  to  compete.  In 
the  colonies  this  favoritism  had  gone  to  such  an  extreme  that 
citizens  could  not  enter  into  many  kinds  of  business  without 
permission  from  representatives  of  the  King.  The  unjust 
imposition  of  tax,  and  the  interference  with  business  con- 
ditions were  the  thorns  which  kept  open  a  rankling  sore,  that 
could  only  be  cured  by  amputation. 

The  British  Parliament  which  had  chartered  the  great 
East  India  Company  and  granted  exclusive  rights  to  favored 
Englishmen  in  colonies  all  over  the  world,  could  not  see  its 
way  to  listen  to  the  protests  of  the  American  colonists;  it 
was  against  the  ideas  of  a  Monarchial  government  or  an  Empire. 

The  British  Parliament  could  not  give  even  English 
citizens  the  rights  demanded  by  the  American  colonists,  and 
on  August  23rd,  1775,  in  answer  to  their  protest  called  atten- 
tion of  the  signers  to  the  fact  that  they  were  forgetting  their 
allegiance. 

It  was  in  answer  to  this  charge  that  the  last  equivocal 
acknowledgement  of  allegiance  was  made  in  the  memorable 
resolution  which  declared  "What  allegiance  it  is  that  we 
forget?  Allegiance  to  Parliament?  We  never  owed — we 
never  owned  it.  Allegience  to  our  King?  Our  words  have 
ever  avowed  it — our  conduct  has  ever  been  consistent  with  it." 

Finding  that  by  a  continued  allegiance,  this  despotic 
control  and  regulation  by  Parliament  of  our  business  affairs 
could  not  be  corrected  or  redressed,  then  and  not  till  then, 
was  the  declaration  of  independence  made;  and  we  estab- 
lished a  government  supposed  to  attend  to  its  own  affairs 
and  allow  its  citizens  to  choose  their  own  form  of  business  in 
their  own  way,  and  through  competition  to  regulate  markets, 
rather  than  by  the  legislative  acts  of  a  parliament  or  a  congress. 

The  Revolution  was  clearly  a  war  against  business 
favoritism,  governmental  control  and  interference  with  private 
business  undertakings  and  unequal  and  arbitrary  taxation. 


22  SOCIALISM  OR  EMPIRE. 


CHAPTER  II. 

CONSTITUTIONAL  PROVISIONS. 

It  can  be  seen  that  the  potent  factor  which  brought 
about  the  independence  of  the  United  States  was  the  protest 
made  by  the  business  men  of  the  colonies  in  regard  to  the 
imposition  of  excessive  tax,  without  the  colonists  having 
anything  to  say  in  regard  to  the  disposition  of  funds  thus 
raised. 

The  popular  cry  of  "no  taxation  without  representa- 
tion" united  the  great  mass  of  the  people,  and  made  a  com- 
mon cause  which  enabled  our  Generals  to  secure  men,  and 
money,  to  continue  a  war  of  eight  years  duration,  with  spas- 
modic success. 

It  was  the  business  men  of  the  colonies  who  carried  the 
revolution  to  a  successful  end;  because  they  felt  that  the 
great  natural  resources  of  the  country  and  their  own  fortunes 
otherwise  would  be  exploited  in  behalf  of  the  Crown  of  England 
and  the  agencies  of  that  power,  and  that  the  regulations 
regarding  private  business  affairs  would  destroy  our  chances 
for  prosperity.  Taxes  had  been  enforced  in  harsh  and  o  er- 
bearing  ways,  and  the  business  of  the  country  had  been  made 
to  pay  such  unequal  tribute,  that  a  man  could  not  tell  what 
his  profits  had  been  until  the  tax  collector  had  finished. 

The  books  of  private  citizens  and  corporations  were 
"investigated",  goods  seized  by  taxing  officers,  and  no  man's 
house  was  safe  from  the  raids  of  government  representatives 
whenever  the  demands  of  the  "Crown"  or  its  officers  had 
to  be  met. 

No  man^s  word  was  taken  in  regard  to  his  profits  or 
losses,  but  government  agents  examined  books  and  papers 
and  enforced  a  payment  of  tax  by  seizure  if  they  so  desired. 
Our  constitution  was  framed  by  men  who  knew  of  the  ills 
of  paternal  government.  It  was  framed  with  a  view  of  pre- 
venting the  very  things  occurring  that  our  semi-socialists 
desire  today. 


CONSTITUTIONAL  PROVISIONS.  23 

While  the  Declaration  of  Independence  had  been  made 
many  years  before,  the  same  element  that  carried  the  revo- 
lution to  success  was  in  control  in  1787  when  the  constitu- 
tion was  framed.  It  has  proved  to  be  the  ablest  document 
of  its  kind  in  existence;  every  phrase  was  considered  care- 
fully and  the  discussions  over  its  construction  are  revelations 
of  thought  on  forms  of  government. 

The  duties  of  government  were  limited,  and  in  that  docu- 
ment they  tried  to  prevent  our  government  from  doing  the 
things  that  had  been  so  obnoxious  to  the  people  as  to  cause 
a  revolution;  the  loss  of  thousands  of  lives  and  the  expendi- 
ture of  $77,682,978.00  at  a  time  when  millions  meant  much 
more  than  they  do  today. 

In  the  declaratory  part  of  the  Constitution  it  is  speci- 
fically stated,  that  the  object  was  "to  form  a  more  perfect 
union,  establish  justice,  insure  domestic  tranquility,  provide 
for  the  common  defence,  promote  the  general  welfare,  and 
secure  the  blessings  of  liberty  to  ourselves  and  our  posterity." 

In  regard  to  the  imposition  of  tax  by  government  they 
were  specific  in  directing  that  all  direct  taxes  should  be  ap- 
portioned according  to  population,  and  in  all  cases  they 
provided  that  representation  should  go  in  exact  proportion 
to  taxation. 

Congress  (the  representatives  of  the  people)  was  the 
only  branch  of  government  granted  any  business  powers 
whatever,  and  it  was  limited  to  the  following  subjects: 

To    levy    and    collect    taxes    etc. 

To  pay  debts  and  provide  for  the  common  defense  and 
the  general  welfare  of  the  United  States. 

To  borrow  money  on  the  credit  of  the   United  States. 

To  regulate  commerce  with  foreign  nations  and  among 
the  several  states  and  with  Indian  Tribes. 

To  coin  money,  regulate  the  value  thereof  and  of  foreign 
coins. 

To   fix   the   standard   of  weights   and  measures. 

To   establish    Post   Offices   and   post   roads. 

Congress  and  the  states  were  prohibited  from  doing 
many  things  which  would  have  interfered  with  private  busi- 
ness enterprise. 

Congress  cannot  levy  a  Capitation  or  other  direct  tax 
unless  in  proportion  to  the  census. 


24  SOCIALISM  OR  EMPIRE. 

No  tax  or  duty^  shall  be  laid  on  articles  exported  from 
any  state. 

No  preference  shall  be  given  by  any  regulation  of  com- 
merce or  revenue  to  the  ports  of  one  state  over  tho.se  of  an- 
other. 

No  state  shall  levy  a  duty  except  to  cover  inspection 
expenses  on  property  coming  from  other  states. 

The  framers  of  the  original  constitution,  living  in  the 
atmosphere  of  protest  against  government  interference  with 
private  business  affairs,  which  had  been  going  on  in  the  col- 
onies since  1638,  did  not  think  it  necessary  to  include  in  the 
original  document  the  specific  injunction  against  encroach- 
ment of  power  by  our  own  government,  such  as  had  caused 
the  war  of  the  revolution.  But  the  talk  of  Washington  being 
an  aristocrat,  and  the  fear  of  states  or  the  nation  forgettng 
the  principles  for  which  that  war  was  fought,  made  such  an 
impression  on  the  people  of  the  several  states  that  a  few  of 
them  subscribed  to  the  original  constitution  with  a  distinct 
understanding  that  amendments  be  made  confirming  to  the 
people  constitutional  rights  in  unmistakable  language. 

The  result  is  that  we  are  the  only  people  in  the  world 
having  constitutional  protection  of  personal  rights  against 
the  action  of  our  own  government. 

Patrick  Henry  in  his  argument  demanding  these  pro- 
visions asserted  that  most  European  people  had  enslaved 
themselves.  "If  it  is  so  in  America  it  will  be  by  the  hands 
of  their  own  people.  If  you  intend  to  reserve  your  unalein- 
able  rights  you  must  have  the  most  express  stapittilation." 

Having  suffered  so  severely  through  the  acts  of  the 
British  Parliament  prior  to  the  revolution,  the  two  greatest 
dangers  feared  by  the  people  were,  legislative  oppression  and 
executive  ambition. 

Following  the  line  of  thought  expressed  by  Patrick 
Henry  the  fourth  and  fifth  amendments  were  expected  to 
protect  our  citizens  from  annoyance  by  government  officials, 
and  to  secure  to  them  property  and  personal  freedom  from 
the  results  of  attempted  legislative  or  executive  interference 
with  private  affairs. 

The  fourth  amendment  provides  that:  The  right  of 
the  people  to  be  secure  in  their  persons,  houses,  papers  and 


CONSTITUTIONAL  PROVISIONS.  25 

effects    against    unreasonable    searches    and    seizures,    shall 
not   be    violated. 

No  warrants  shall  issue  but  upon  probable  cause  sup- 
ported by  oath  or  affirmation  and  particularly  describing 
the  place  to  be  searched'  and  the  persons  or  things  to  be 
seized. 

The  fifth  amendment  provides  that:  In  a  criminal 
case  no  person  shall  be  compelled  to  be  a  witness  against 
himself  nor  be  deprived  of  life,  liberty  or  property  without 
due  process  of  law,  nor  shall  private  property  be  taken  for 
public  use  without  just  compensation. 

As  a  guard  against  our  officers  or  law  makers  assuming 
functions  not  granted  them,  the  Ninth  amendment  provides 
that  "The  enumeration  in  the  constituiton  of  certain  rights, 
shall  not  be  construed  to  deny  or  disparage  others  retained 
by  the  people." 

In  the  Tenth  amendment  it  further  provides  that:  "The 
powers  not  delegated  to  the  United  States  by  the  constitution 
nor  prohibited  by  it  to  the  states  are  reserved  to  the  states 
respectively,  or  to  the  people." 

After  the  Civil  war  amendments  were  made  to  cover 
the  new  condition  in  the  south,  following  the  freedom  given 
the  slaves,  and  another  specific  guarantee  to  property  own- 
ers was  given  in  the  fourteenth  amendment  where  the  states 
are  prohibited  from  abridging  the  privilege  or  "immunities" 
of  citizens  of  the  United  States,  making  a  more  explicit  pro- 
tection to  property  rights  than  was  expressed  in  the  fifth 
amendment. 

The  foregoing  extracts  give  every  business  point  pre- 
sented by  the  Constitution  of  the  United  States. 

The  constitution  does  not  provide  or  countenance  any 
Executive  action  not  provided  by  a  law  of  congress.  Con- 
gress is  the  only  power  that  should  order  the  transaction 
of  any  government  business,  and  it  was  supposed  to  be 
limited  to  purely  governmental  questions.  Congress  cannot 
rightfully  delegate  its  power  to  the  Executive  and  he 
to  a  Secretary  and  the  Secretary  to  a  commission  or  clerk 
and  have  an  inquisitorial  investigation  carried  on  in  regard 
to  the  business  of  private  citizens.  The  constitution  ex 
pressly  intended  that  not  even  the  courts  could  Icok  over 
the  books  and  papers  of  a  citizen  of  the  United  States,  it 


26  SOCIALISM  OR  EMPIRE. 

was    for  this  freedom  that  the  war  of  the  Revolution  was 
fought. 

It  is  this  freedom  that  has  made  this  nation  great. 
Keep  in  mind  that  the  constitution  represented  the 
ripest  thought  of  that  time  in  regard  to  the  dangers  of  a  pa- 
ternal or  monarchial  government;  it  was  a  protest  against 
its  continuance  and  a  guarantee  to  our  citizens  that  their 
right  to  be  secure  in  their  persons,  houses,  papers  and  effects 
against  unreasonable  searches  and  seizures,  shall  not  be  violated. 

This  semi-socialistic  movement  of  to-day  would  clothe 
our  executive  authority  with  the  very  power  we  fought  to 
destroy  over  one  hundred  years  ago.  It  would  create  an 
inquisitor  governed  by  a  mob  instead  of  a  ministry. 

It  would  mean  that  idle  tattlers  could  start  investiga- 
tions, and  tear  down  business  structures  that  had  taken 
years  to  build  and  to  no  good  end.  The  rabble  who  lead 
on  in  this  class  of  attack  gain  nothing  themselves,  but  sadly 
injure  others. 

The  rights  of  suffrage,  of  free  speech,  and  freedom 
from  government  control  of  business  affairs  is  wrhat  consti- 
tutes our  "liberty." 

Are  the  people  of  the  United  States  going  to  turn  back 
to  government  the  greater  part  of  their  "rights"  because 
of  the  clamor  of  a  few  irresponsible  busy  bodies,  who  desire 
to  attend  to  other  peoples  business  instead  of  their  own? 

Are  we  ready  to  turn  back  to  government  the  right  to 
supervise  or  control  our  private  affairs  in  the  face  of  the  fact, 
that  by  attending  to  our  own  business  we  have  advanced 
in  material  wealth  more  rapidly  than  any  nation  in  history? 

When  the  so  called  "public"  is  allowed  to  enter  into 
competition  with  private  citizens  or  corporations  (there  is 
no  difference)  in  business  matters,  and  is  allowed  to  own 
and  control  competitive  ventures  and  to  "regulate"  and  make 
"unreasonable  searches  and  seizures"  through  executives 
of  their  election,  without  protest,  the  decay  of  the  Republic 
will  have  begun. 

The  President  when  asking  for  the  power  to  regulate, 
control  restrain  and  intimidate  great  business  interests, 
through  the  passage  of  laws  giving  affirmative  action  to  the 
executive  department,  says  it  is  only  an  "innovation  inform" 


CONSTITUTIONAL  PROVISIONS.  27 

and  in  reality  "it  is  only  a  restoration  to  the  power  of  the 
executive  granted  by  law  making  bodies  generally." 

It  was  the  power  taken  from  the  executive  through 
bloody  years  of  war  commencing  in  1775,  and  to  restore  it 
now  is  an  "innovation"  so,  extreme  as  to  mean  complete 
revolution." 

The  congress  has  been  careless  in  granting  executive 
power  to  such  a  degree,  that  it  hardly  dare  represent 
the  people  at  present  in  case  it  crosses  the  purpose  of  the 
President,  and  apparently  has  lost  all  control  over  affairs 
purely  intended  to  be  under  their  supervision. 

In  attempting  to  follow  socialistic  suggestions  in  refer- 
ence to  corporate  control  through  the  executive  department 
it  is  building  up  a  power  that  may  mean  socialism  or 
Empire.  Certainly  one  or  the  other. 


28  SOCIALISM  OR  EMPIRE. 


CHAPTER  III. 

INDIVIDUAL  RIGHTS  IN  DIFFERENT  NATIONS. 

The  citizens  of  the  United  States  are  the  only  ones  whose 
individual  rights  are  protected  by  constitutional  provisions 
unchangeable  by  legislative  whims. 

The  framers  of  our  constitution  provided  that  amend- 
ments be  made  only  by  a  slow  process  and  with  great  unan- 
imity; two-thirds  of  congress  or  two-thirds  of  the  states 
must  unite  in  proposing  an  amendment  and  the  legislatures 
of  three  fourths  of  the  states  must  ratify  (without  chance 
to  alter  the  amendment  presented)  before  it  can  be  adopted. 

This  written  constitution  has  given  personal  guarantees 
to  our  citizens  not  granted  any  other  people. 

It  may  sound  strange  but  the  people  of  the  United  States 
are  the  only  ones  guaranteed  and  protected  from  the  actions 
of  their  own  government. 

These  guarantees  were  so  specific  in  character  that  ex- 
ceptional guards  were  provided. 

Nearly  all  interference  with  the  personal  liberty  of 
citizens  would  naturally  arise  from  legislative  or  executive 
action,  and  our  constitution  is  the  only  one  which  makes 
the  courts  a  co-ordinate  constitutional  branch  of  the  gov- 
ernment. 

The  Constitution  of  the  United  States  created  our  Su- 
preme Court  while  in  England,  Germany  and  France  the 
courts  are  created  by  statutes  provided  through  acts  of 
Parliament  or  legislature. 

Professor  Burgess  in  his  able  work  on  Political  Economy 
explains  that  "The  sovereignty  back  of  the  government  in 
in  the  United  States  vests  the  power  in  the  courts  to  inter- 
pret the  prescripts  of  the  constitution  in  behalf  of  indi- 
vidual rights  and  immunities  and  to  defend  the  same  against 
the  arbitrary  acts  of  the  legislature  or  executive". 


INDIVIDUAL  RIGHTS.  29 

No  other  nation  gives  this  power  to  a  court,  and  no 
other  nation  creates  a  court  through  constitutional  pro- 
visions. 

In  no  European  country  can  a  court  question,  reverse 
or  check  a  legislative  action,  and  the  individual  citizen  has 
no  remedy  against  legislative  or  executive  interference. 
In  all  of  those  countries,  the  courts  being  creations  of  legis- 
lation cannot  correct  or  impair  acts  of  the  legislature, 

In  England  Parliament  interprets  the  constitution  and 
all  forms  of  individual  liberty  in  that  country  are  entirely 
the  whim  of  Parliament.  The  English  Parliament  can  if  it 
so  desires  take  away  from  the  citizens  every  form  of  individ- 
ual liberty  and  abolish  the  courts  by  a  single  legislative  en- 
actment. The  Parliament  by  an  address  to  the  crown  can 
remove  any  Judge  in  the  Kingdom.  The  only  remedy  in 
England  which  an  individual  could  use  to  seek  redress  in 
in  case  of  a  controversy  with  the  government,  would  be 
through  Parliament. 

In  France  there  is  not  a  single  constitutional  guarantee 
of  the  rights  of  private  citizens.  The  National  Assembly, 
not  the  courts,  is  the  final  intrepreter  of  the  constitution 
and  all  amendments  must  originate  with  it.  If  the  govern- 
ment should  interfere  with  the  private  rights  of  an  individual 
citizen,  his  only  remedy  would  be  in  the  Assembly,  not  the 
courts. 

In  Germany,  the  Emperor  is  the  final  interpreter  of 
the  Constitution,  and  the  constitution  cannot  be  changed 
except  through  machinery  started  by  the  Imperial  legislature. 
The  result  is  that  the  individual  citizen  has  no  remedy  what- 
ever against  either  legislative  or  executive  action. 

While  Germany  has  gone  farther  in  expressions  favor- 
able to  individual  liberty  than  any  other  European  nation, 
it  as  yet  has  not  given  the  individual  any  guarantee  against 
aggressions  of  government  and  he  is  still  subject  to  the  ca- 
price or  tyranny  of  legislative  or  executive  control. 

In  Germany  the  court  being  a  statutory  body  and  not 
a  constitutional  one,  cannot  defend  the  individual  from  any 
legislative  or  executive  acts  of  the  central  government. 

The  constitution  of  Germany  makes  the  Chancellor 
responsible  for  the  acts  of  the  Emperor,  but  strangely  does 
not  provide  for  any  means  of  enforcing  the  responsibility. 


30  SOCIALISM  OR  EMPIRE. 

In  the  imperial  territory  of  Alsace-Lorraine  there  is  no 
immunity  whatever  provided  against  the  power  of  the  gen- 
eral government  Over  individual  rights. 

Contrary  to  the  idea  which  many  would  have,  that  these 
omissions  were  the  result  of  ancient  constitutions  which  had 
not  received  the  benefit  of  later  conditions  and  thought, 
all  of  the  constitutions  of  Europe  are  of  late  date. 

The  so  called  English  Constitution  is  a  creature  of  cir- 
cumstances. While  it  is  termed  an  "Unwritten"  constitu- 
tion, so  much  has  been  placed  on  record  in  one  form  or  anoth- 
er, that  its  main  features  are  indellibly  fixed  in  the  minds 
of  all  English  people.  On  investigation  the  famous  "Magna 
Charta"  is  nothing  but  an  act  of  Parliament  subject  to 
change  at  any  time. 

The  shifting  of  sovereignty  from  a  King,  to  the  nobles, 
and  then  to  Parliament  was  a  process  of  evolution  extending 
from  1215  to  1 83 2,  but  the  fundamental  basis  of  the  English 
Government  of  today  really  commenced  on  the  later  date. 

The  English  Constitution  is  however  a  "myth",  the 
Parliament  of  England  is  a  perpetual  constitutional  conven- 
tion when  in  session  and  the  rights  of  the  people  are  subject 
to  its  dictation.  There  are  no  written  guarantees  given 
the  individual. 

The  constitution  of  Germany  is  of  later  date.  The 
confederation  of  the  German  States  was  not  perfected  until 
1871.  The  pride  of  conquest,  and  worship  of  military  power 
caused  only  a  perfunctory  revision  of  the  constitutions  of 
of  the  states  which  comprised  the  new  Empire.  The  pres- 
ent constitution  of  the  German  Empire  is  a  compilation  of 
constitutions  already  in  force  in  several  states,  and  no  changes 
in  organic  law  were  attempted.  So  that  while  Germany  has 
a  written  constitution  it  provides  for  a  government  of  a 
people  and  not  a  government  by  the  people. 

The  present  constitution  of  France  was  framed  so  shortly 
after  the  mercurial  temper  of  the  "common  people"  had 
been  displayed  in  the  incidents  which  had  occurred  after 
the  German  occupation  of  Paris,  that  the  people  were  to  a 
certain  extent  afraid  of  themselves. 

The  French  constitution  of  1876  has  not  one  sentence 
which  could  be  distorted  into  a  form  of  protection  of  indi- 
vidual rights  as  against  the  French  Government. 

To  all  intents  the  National  Assembly  is  the  only  guardian 


INDIVIDUAL  RIGHTS.  31 

over  personal  liberty  or  individual  rights.  The  Assembly 
originates  any  amendments  to  the  constitution  and,  knowing 
the  temper  of  the  French  people,  in  1884  attempted  to  hold 
itself  to  a  Republican  form  of  government  by  enacting  a 
constitutional  amendment  "that  the  Republican  form  of 
government  shall  never  be  subject  to  revision". 

This  amendment  is  mere  verbiage  because  the  Assembly 
can  reverse  itself  at  any  future  time  if  it  so  desires. 

I  have  given  these  details  regarding  forms  of  govern- 
ment with  a  view  of  making  it  plain  to  the  reader  why  it 
would  be  unconstitutional  for  our  congress  or  executive  to 
interfere  with  private  individual  rights,  when  they  attempt 
to  do  things  here,  which  are  done  in  European  countries. 
I  have  given  the  comparison  with  the  highest  forms  of  gov- 
ernment. 

It  is  not  necessary  to  cite  Mexico  where  there  is  no 
protection  against  the  government,  principally  because  of 
the  same  fear  of  the  common  people  as  in  France;  or  the 
latest  accession  to  civilization,  i.  e.  Japan  where  the  com- 
mon people  are  only  allowed  to  participate  in  the  right  to 
die  for  their  country. 

The  constitution  of  the  United  States  is  the  great  and 
only  exception  in  that  it  guards  individual  rights  against 
the  government  itself,  and  provides  a  co-ordinate  branch 
of  government  i.  e.  the  courts,  to  protect  the  common  people 
from  vicious  legislation  or  executive  aggression. 

This  socialistic  agitation  is  a  request  that  these  con- 
stitutional rights  be  withdrawn  from  "rich"  people;  people 
who  have  combined  together  and  formed  great  corporations, 
but  who  still  are  as  much  "common  people"  as  the  poorest 
laborer  or  the  socialistic  tramp.  The  agitators  want  the 
government  to  interfere  with  the  constitutional  individual 
liberty  guaranteed  the  man  who  has  succeeded,  and  if  possi- 
ble, make  him  give  up  to  the  state  or  the  community  some 
of  his  increment. 

The  knowledge  that  private  incentive  had  received 
this  constitutional  guarantee  in  the  United  States  has  brought 
into  existence  here  the  greatest  system  of  transportation 
on  the  globe.  It  has  created  the  greatest  steel  manufactur- 
ing corporation  in  existence,  an  oil  company  which  controls 
the  markets  of  the  world,  and  hundreds  of  manufacturing 
and  mercantile  ventures  so  great  that  the  historical  opera- 


32  SOCIALISM  OR  EMPIRE. 

tions  of  the  East  India  company,  which  was  supposed  to 
be  the  greatest  trading  company  of  the  time,  would  be  but 
an  ordinary  venture  for  Americans  to  undertake. 

The  "common  people"  of  today  may  be  the  capitalists 
of  the  future.  They  stand  in  their  own  light  if  they  insist 
on  the  removal  of  these  protections  to  individual  rights. 

Our  constitution  was  framed  with  the  purpose  in  view 
of  making  it  difficult  to  change.  The  founders  of  the  gov- 
ernment had  confidence  in  the  "common  people",  but  recog- 
nized that  they  were  liable  to  act  without  consideration, 
and  as  a  check  upon  unwise  action  made  a  change  in  our 
constitution  more  difficult  than  in  that  of  any  other  nation. 

It  was  done  with  a  view  of  obliging  deliberation  upon 
any  changes  desired.  In  these  other  counties  where  rulers 
by  "divine"  right  are  recognized  by  the  power  which  frames 
the  constitution  itself,  and  where  individual  liberty  is  not 
recognized  either  by  the  constitution  or  the  Executive; 
initiative  control  of  private  business  conduct  can  be  exer- 
cised and  it  would  still  be  within  the  lawful  province  of  gov- 
ernment. 

If  we  change  our  constitution,  taking  over  power 
to  our  government  to  do  these  things,  it  would  be  lawful 
in  the  United  States  for  the  government  to  regulate,  control 
and  investigate  individual  property  investments  and  opera 
tion  and  to  enter  into  business  competition  with  our  own 
citizens,  but  until  such  a  change  is  made  the  effort  is  not 
only  illegal  but  against  our  public  policy.  The  advocates 
for  such  a  revolutionary  change  in  the  power  of  our  govern- 
ment, should  formulate  an  amendment  to  the  constitution 
and  start  it  on  its  rounds  among  the  several  states. 

It  is  unfair  to  the  courts  for  Congress  and  the  President 
to  put  up  to  them  such  a  question  as  this,  when  in  plain 
terms  it  is  the  duty  of  the  courts  to  prevent  this  very  form 
of  encroachment  on  the  individual  rights  of  the  people. 

If  a  "square  deal"  is  really  desired  present  a  con- 
stitutional amendment  to  the  people,  and  do  not  engineer 
laws  through  congress  like  the  "  Inter  State  Commerce", 
"The  Elkins",  "The  Hepburn  Dolliver",  "Meat  Inspection" 
and  many  others  which  clearly  are]  unconstitutional,  but 
which  were  passed  by  congress  with  meaning  so  vague  that 
the  courts*have  permitted  our  legislative  department  to  play 
tricks  upon  our  fundamental  law. 


GETTING  AROUND  THE  CONSTITUTION.  33 


CHAPTER  IV. 

DANGER  IN  ATTEMPT  TO  "GET  AROUND  THE  CONSTITUTION." 

The  great  mass  of  American  people  are  so  absorbed  in 
business  pursuits  or  busy  with  their  own  affairs,  that  they 
pay  little  attention  to  public  matters.  If  you  call  a  man's 
attention  to  the  fact  that  some  of  the  things  proposed  infringe 
on  our  constitutional  rights  as  a  people  he  says :  "By  George ! 
that  is  so.  I  never  thought  of  it  that  way  before,"  and 
immediately  forgets  all  about  it,  until  something  else  brings 
it  to  mind. 

The  men  who  advocate  these  encroachments  on  our 
constitutional  rights  and  are  assisting  the  cause  of  socialism 
thereby,  invariably  assert  that  "the  people"  or  "the  public" 
demand  this  or  that. 

The  people  and  public  they  talk  about  are  as  indefmit- 
a  quantity  as  the  "they  say"  of  slander,  or  the  three  tailore 
of  London.  I  notice  that  when  meetings  are  called  to  ad- 
vance this  agitation  for  public  control  of  business  affairs, 
that  the  conservative  property  owners  object  to  the  change. 
While  the  great  majority  of  our  citizens  do  not  claim  to 
understand  all  of  the  objects  of  government,  or  make  a  study 
of  political  science,  they  intuitively  feel  that  most  of  these 
experiments  are  dangerous.  They  know  that  their  country 
has  grown  exceedingly  prosperous  under  our  conditions  ex- 
isting, and  feel  like  "letting  well  enough  alone." 

When  this  element  is  advised  of  the  situation,  this  rage 
of  public  control  and  regulation  of  everything  will  die 
the  same  as  many  other  remarkable  political  moves  of  the 
past.  It  will  be  found  that  the  public  and  the  people  who 
are  now  demanding  that  an  executive  power  be  given  over 
business  affairs;  upon  investigation  will  prove  to  be  the 
little  crowd  of  noisy  agitators,  the  irresponsible  brawlers 
or  pothouse  politicians  who  make  a  business  of  blackmailing 


34  SOCIALISM  OR  EMPIRE. 

public  men  and  others,  assisted  by  the  socialists  who  want 
to  destroy  all  property  rights.  The  better  class  of  our  citi- 
zens are  slower  to  act  and  not  as  quick  of  thouught  as  the 
fiery  agitator,  but  when  once  they  see  the  danger  of  a  politi- 
cal move,  they  ally  themselves  on  the  safe  side  without  fail. 

When  the  thinking  people  of  the  United  States  see  that 
this  agitation  means  the  loss  of  the  greater  portion  of  the 
"liberty"  of  which  we  are  so  proud,  it  will  not  take  them 
long  to  "turn  it  down." 

Any  business  to  be  controlled  or  operated  by  the  public 
or  people,  if  you  please,  must  be  managed  in  detail  by  some 
branch  of  the  executive  department. 

In  cities  the  mayor  or  some  executive  board  would 
direct,  while  in  State  and  National  control  any  executive 
action  would  come  through  the  Governor  of  the  State  or 
the  President.  The  greatest  danger  to  a  Republic  is  the 
tendency  to  take  power  on  the  part  of  the  executive,  and 
it  was  this  feature  more  than  any  other  that  caused  the 
framers  of  our  constitution  to  provide  that  congress  must 
do  all  the  business  of  the  government. 

The  Executive  was  restrained  from  doing  anything  ex- 
cept enforce  the  laws,  grant  pardons,  assist  in  making  treat- 
ies and  appoint  ambassadors,  etc.,  convene  congress  in  an 
emergency,  and  report  to  congress  on  the  state  of  the  Union 
and  to  recommend  for  their  consideration  those  things  nec- 
essary or  expedient.  In  other  words,  he  was  the  high  executive 
officer  to  enforce  the  laws  passed  by  congress. 

Congress  arid  our  state  legislators  should  see  to  it  that 
instead  of  turning  over  more  and  more  power  to  the  executive 
department,  that  that  department  should  be  hedged  about 
by  laws,  so  as  not  to  allow  any  of  the  rights  of  citizens  to  be 
lost  or  impaired. 

The  agitation  which  now  has  in  view  the  creation  of  an 
executive  power  to  govern  insurance,  railroads,  packing 
houses,  trusts,  etc.,  is  exactly  what  this  country  does  not 
want,  and  it  would  put  in  the  hands  of  our  executive  a  power 
more  comprehensive  than  any  constitutional  Monarchy  grants 
a  king. 

It  would  place  the  President  in  such  a  position  that 
in  case  he  chanced  to  have  the  ambition  he  could  do  what 
has  been  done  at  the  "wind  up,'  of  every  great  Republic  of 
the  past. 


GETTING  AROUND  THE  CONSTITUTION.  35 

If  he  were  to  have  the  Army  and  Navy  and  the  vast 
other  army  of  appointees  at  his  back,  along  with  the  power 
to  "regulate  and  control"  the  larger  business  ventures  brought 
into  being  by  private  capital,  it  might  be  a  power  too  great 
for  some  men  to  withstand. 

We  have  a  President  today  whose  patriotism  is  undoubt- 
ed but  whose  aggressive  acts  could  be  duplicated  by  a  tyrant 
seeking  personal  ends,  with  disaster  to  our  institutions.  He 
likes  to  "do  things"  and  is  so  thoroughly  sincere  in  his  belief 
that  he  is  right  on  every  question,  that  he  carries  many  with 
him,  and  in  this  attempt  to  control  business  affairs  by  gov- 
ernment regulation,  he  is  applauded  by  the  socialists,  the 
labor  unions,  and  the  agitators,  in  addition  to  the  thousands 
of  people  who  are  perfectly  willing  to  let  him  do  their  po- 
litical thinking  for  them. 

It  is  not  a  probable  thing  that  a  President  would  be  a 
good  business  man  •  he  has  had  to  give  too  much  thought 
to  politics  to  be  proficient  in  handling  business  matters, 
and  it  is  the  same  with  our  congressmen  to  a  great  ex- 
tent. A  good  many  governors  of  states  have  been  selected 
from  the  ranks  of  successful  business  men,  but  none  of  these 
have  ever  advocated  the  so  called  "reforms",  which  means  the 
loss  of  part  of  the  rights  of  the  people. 

It  is  extraordinary  presumption  for  an  executive  of  a 
state  or  the  nation,  to  advocate  or  press  on  the  legislative 
department  measures  which  would  allow  control  of  great 
business  ventures  through  the  action  of  Boards  or  Com- 
missions of  his  creation. 

With  the  great  corporations  "controlled"  and  made 
subservient  to  an  executive  power,  it  would  not  take  long 
for  a  man  who  orders  the  army  and  navy  officers  to  "keep 
quiet"  on  political  subjects,  who  intimates  to  his  own  cabi- 
net officers  that  he  "will  do  the  talking  for  the  adminstra- 
tion";  to  imbibe  the  idea  that  he  should  dictate  about  the 
whole  running  of  affairs  in  the  United  States. 

If  the  power  is  given  no  matter  what  happened  it  could 
all  be  done,  because  the  "people"  wanted  it. 

Ceasar  and  Napoleon  both  claimed  to  represent  the 
"people"  at  the  time  they  assumed  power.  Even  the  Presi- 
dential changes  in  Santo  Domingo  are  all  claimed  on  behalf 
of  the  "people",  and  we  in  the  most  enlightened  and  free 


36  SOCIALISM  OR  EMPIRE. 

country,  in  this  twentieth  century,  at  the  instance  of  a  worked 
up  demand  of  the  "people",  are  asked  to  place  in  the  hands 
of  our  executive  department  a  two-edged  sword  that  we 
expect  to  cut  one  way,  but  which  in  every  instance  in 
the  past  has  cut  another. 

It  is  all  right,  and  proper  for  the  people  or  public  to 
regulate  domestic  tranquility  and  have  an  executive  enforce 
their  will  in  regard  to  governmental  problems,  but  it  is  all 
wrong  for  the  people  to  attempt  to  delegate  an  unconstitu- 
tional power  to  an  executive  over  the  business  affairs  of  citi- 
zens who  transgress  no  law. 

Congress  by  the  constitution  is  charged  with  specific 
powers  and  the  only  phrase  which  could  be  misunderstood 
is  the  expression  that  among  other  things  it  could  "pay 
debts  and  provide  for  the  common  defense  and  general  wel- 
fare of  the  United  States."  When  the  whole  instrument  is 
considered,  and  the  intent  of  the  framers  known,  it  is  evident 
that  congerss  itself  could  not  rightfully  frame  a  law  that 
would  grant  to  any  branch  of  the  government  supervisory 
regulative  powers.  Congress  could  only  pass  specific  laws 
covering  the  situation,  and  the  executive  department  then 
should  see  that  the  law  was  enforced. 

No  work  of  construction  or  any  government  business 
should  be  attempted  except  by  contract  with  American 
citizens,  under  plans  adopted  by  congress. 

In  other  words,  congress  should  run  every  business 
undertaking  attempted  by  our  government,  and  it  has  no 
right  to  delegate  its  power  to  an  executive  or  any  branch  of 
the  executive  department,  and  a  proposition  to  give  a  com- 
mission or  board  in  the  executive  department  discretionary 
power  of  control  over  private  citizens  business  affairs,  is 
one  so  plainly  unconstitutional  as  to  practically  revolution- 
ize our  system  of  government. 

I  am  well  aware  of  the  fact  that  many  lawyers  will  dis- 
agree with  my  ideas  about  constitutional  restraints  regard- 
ing executive  action,  and  they  will  do  so  because  they  have 
only  read  their  books  of  law  and  reference,  without  having 
read  the  history  of  their  country.  For  over  one  hundred 
years  congress  and  our  legislatures  have  been  passing  laws, 
knowing  them  to  be  unconstitutional,  either  at  the  request 
of  some  political  party  or  to  meet  some  supposed  emergency, 
hoping  that  the  courts  would  let  them  stand. 


GETTING  AROUND  THE  CONSTITUTION.  37 

Several  laws  of  this  character  have  slipped  through 
the  courts;  usually  through  poor  presentation  of  the  case 
to  the  reviewing  authority  or  at  times  by  reference  of  an 
agreed  case  on  the  constitutional  point  in  which  decision 
was  desired  on  some  other  phase  of  the  question  in  controversy. 

Several  of  the  decisions  of  the  Supreme  court  which 
are  at  variance  with  my  views,  while  tacitly  acknowledg- 
ing the  power  of  legislatures  and  congress  to  delegate  inquis- 
itorial authority,  only  do  so  in  a  negative  way,  by  not  com- 
menting on  the  constitutional  point,  while  allowing  the  state- 
ment in  the  text. 

Members  of  congress  continually  charge  the  courts  with 
unfairness  in  making  their  decisions,  and  it  is  the  fashion 
among  those  socialistically  inclined  to  condemn  their  action, 
but  it  is  fortunate  for  the  people  that  the  courts  act  inde- 
pendently or  "freak"  legislators  would  have  completely 
revolutionized  the  country  ere  this. 

President  Roosevelt  has  gone  further  than  any  other  presi- 
dent in  pressing  upon  congress  clearly  unconstitutional  methods. 

His  request  that  extraordinary  powers  be  given  the 
Inter  State  Commerce  Commission,  and  in  the  message 
plainly  saying,  that  if  the  courts  found  a  law  thus  passed 
to  be  unconstitutional,  the  constitution  should  be  changed, 
was  remarkable;  but  the  suggestion  that  congress  should 
try  and  make  insurance  Inter  State  Commerce,  and  try 
that  on  the  courts,  was  worse  than  remarkable. 

The  decisions  given  by  our  courts  but  prove  the  great 
value  of  our  constitution  and  recommendations  such  as 
these  show  the  pressure  brought  to  bear  on  the  courts  by 
executives  and  designing  congressmen. 

The  two  greatest  dangers  feared  by  our  forefathers  were 
the  seizure  of  power  by  the  executive  and  unreasonable  ac 
tion  by  the  common  people  and  these  were  the  reasons  why  the 
senate  was  made  to  represent  the  states,  while  the  House 
of  Representatives  represented  the  people;  with  the  courts 
to  see  to  it  that  neither  of  the  political  adjuncts  of  government 
interfered  with  property  rights.  As  a  broad  proposition 
every  law  attempting  to  grant  our  government  power  to 
do  business  or  to  "regulate"  private  business  affairs,  except 
by  direct  general  laws  governing  all  business,  is  a  violation 
of  the  intent  of  the  framers  of  our  constitution,  and  every 
exception,  even  to  the  one  allowing  the  government  to  go 


38  SOCIALISM  OR  EMPIRE. 

into  the  Post  Office"business"  has  worked  injury  to  the  country. 

The  Presidents  recommendation  that  hereafter  laws  should 
be  passed  giving  initiative  action  to  the  Executive  Depart- 
ment of  our  Government,  and  the  evident  careless  way  in 
which  the  congress  received  the  recommendation,  and  followed 
instruction,  is  the  entering  wedge  of  either  Empire  or  socialism . 

It  is  a  proposed  change  in  our  form  of  government  so 
sweeping  in  character  that  this  first  definite  effort  should  te 
blocked. 

It  is  a  change  from  negative  legislation  to  initiative  con- 
trol and  every  citizen  should  study  well  the  question  and 
decide  for  himself  whether  he  desires  the  change. 

Caesar  was  the  first  "reformer"  who  openly  recommended 
the  overthrow  of  his  nation's  constitution.  He  was  a  Demo- 
crat and  recommended  the  change  in  the  interests  of  the 
"common  people". 

His  success  through  the  assistance  of  the  Burgesses  first 
in  unconstitutionally  extending  his  own  term  of  service  and 
granting  him  command  of  three  legions,  and  second  in  pushing 
through  the  agrarian  law,  distributing  land  in  severalty  to 
the  soldiers  of  Pompius,  called  attention  to  himself,  and 
rallied  to  his  political  standard  the  dissatisfied.  Gabinius  and 
Manilius  had  wrongfully  taken  the  power  from  the  senate  to 
originate  legislation  and  placed  it  with  the  Democracy  or 
representatives  of  the  tribes.  They  planted  the  seed  for 
Pompius,  and  Caesar  garnered  the  harvest.  Caeser  was  a 
party  man  and  an  orator.  His  "reforms"  caught  the  ear  of 
the  unthinking,  and  soon  the  representatives  of  the  "common 
people"  placed  so  much  power  with  him,  that  when  afterward 
crossed  in  his  purpose,  he  crushed  all  opposition  and  rewrote 
the  constitution  of  Rome. 

In  furthering  his  agitation,  he  adopted  the  plan  of  in- 
timidating capital  popular  to  all  socialistically  inclined,  so 
that  one  of  the  great  capitalists  of  that  day  wrote  "We  already 
through  fear  of  death  or  banishment  despair  of  freedom, 
everyone  sighs,  no  one  ventures  to  speak." 

Caesar,  through  Claudius  promised  everything  to  the 
common  people  and  antagonized  class  against  class  and  con- 
trolled the  meetings  of  the  Burgesses  through  his  oratory  and 
absolute  control  of  party.  The  Burgesses  (the  representa- 
tives of  the  common  people)  connived  with  Caesar  at  the  over- 
throw of  the  Senate  and  when  the  change  in  membership  of 


GETTING  AROUND  THE  CONSTITUTION.  39 

the  Senate  was  increased  wrongfully  to  900  members,  Caesar 
himself  filled  the  vacancies.  Soon  thereafter  members  of  the 
Senate  were  frequently  surprised  to  see  decrees  published 
by  authority  of  the  Senate  which  had  not  been  considered 
at  all.  The  constitution  was  defied,  and  in  the  end  this 
despot  doubled  the  size  of  his  army,  crushed  all  opposition 
and  a  Roman  Empire  rose  from  the  wreck  of  the  first  great 
Republic.  An  Imperator  ruled  until  the  final  tragedy. 

In  France,  the  change  while  more  sudden  and  spec- 
tacular but  duplicated  the  action  of  Caesar. 

Napoleon,  on  his  return  from  Egypt,  wishing  to  get  power 
within  his  hands,  attempted  first  to  have  an  immaterial  change 
made  in  the  constitutional  restrictions  regarding  age  of  mem- 
bers of  the  Directory  (on  account  of  his  youth)  and  until  the 
supreme  moment  prated  of  the  inviolability  of  the  constitu- 
tion of  France.  Within  30  days  of  the  Coup  d'  Etat  he  said 
that  while  France  had  been  able  to  secure  a  constitution 
founded  on  reason  they  had  1800  years  of  prejudice  to  over- 
come. The  day  before  he  drove  the  legislative  five  hundred 
out  of  the  hall  of  St.  Cloud  he  protested  "that  we  are  resolved 
to  have  a  Republic,  we  are  resolved  to  have  it  founded  on 
true  liberty  and  a  representative  system."  "I  swear  it  in 
my  own  name  and  my  companions  in  arms"  while  on  the 
succeeding  day  he,  when  asked  to  swear  obedience  to  the 
constitution,  declared  "the  constitution  does  not  exist"  and 
proceeded  to  form  a  constitution  of  his  own,  giving  power 
to  a  single  consul  to  govern  with  Imperial  will. 

Initiative  control  of  business  affairs  by  our  executive 
department  is  against  Republican  principles.  It  places 
power  where  it  does  not  belong,  it  is  plainly  an  adjunct  of 
Empire  or  Monarchy,  and  not  of  a  free  people. 

Benjamin  Franklin  on  June  4th,  1787,  said  in  regard  to 
Presidential  power:  "The  first  man  put  at  the  helm  will  be 
a  good  man.  Nobody  knows  what  sort  may  come  after- 
wards. The  Executive  will  be  always  increasing  till  it  ends 
in  Monarchy."  Are  we  now  preparing  to  fulfill  this  prophesy? 
Should  we  give  the  present  Executive  power  we  would  not 
trust  to  Mr.  Hearst,  Debbs  or  Haywood  or  any  wild  eyed 
reformer  who  would '  f  chance'  to  become  popular  with  the 
people  ? 

Is  it  not  better  to  make  no  attempt  to  get  around  our 
written  constitution? 


40  SOCIALISM  OR  EMPIRE. 


CHAPTER  V. 

PANAMA  CANAL. 

The  tendency  of  our  lower  house  of  congress  to  follow 
in  the  footsteps  of  the  Burgesses  of  Rome,  by  granting  power 
to  a  popular  executive  far  beyond  what  the  constitution 
intended,  is  remarkably  demonstrated  in  the  operations  con- 
nected with  the  construction  of  the  Panama  Canal. 

Up  to  the  present  time  it  has  voted  vast  sums  of  money 
toward  the  canal's  construction,  and  left  the  whole  matter 
in  the  hands  of  the  President. 

There  is  no  doubt  but  what  the  executive  department 
has  done  everything  possible  in  an  attempt  to  see  that  the 
money  was  expended  properly,  but  it  is  a  load  of  detail  that 
never  should  have  been  left  for  it  to  carry. 

The  government  of  the  zone,  the  framing  of  laws  and  all 
the  business  in  connection  with  the  work  is  going  on  "by  order 
of  the  President." 

In  fact  everything  is  now  going  on  at  Panama  that  the 
Imperialists  and  Socialists  desire  and  advocate. 

In  framing  laws  the  commission  use  the  expression  "by 
authority  of  the  President  of  the  United  States  be  it  enacted 
by  the  Isthmean  Canal  Commission"  and  all  kinds  of  orders 
are  given  by  "the  direction  of  the  President." 

Even  regulations  of  commerce  and  coinage  are  assumed 
by  the  Executive  Department  although  these  duties  are 
specifically  delegated  to  congress.  It  is  the  evident  intention 
that  all  the  business  connected  with  the  enterprise  shall  be 
done  by  the  executive  department.  It  is  improbable  that 
a  work  so  vast  as  this  promises  to  be,  extending  over  a  good 
many  years,  and  under  several  different  administrations,  can 
go  forward  without  considerable  friction,  if  the  executive 
department  should  attempt  to  employ  the  labor  engaged  in  its 
construction. 


PANAMA  CONTROL.  41 

While  the  initial  labor  attendent  to  clearing  up  the 
Isthmus  and  putting  it  in  sanitary  condition  might  success- 
fully be  done  by  government  employees,  it  could  not  be  as 
cheaply  and  effectively  done  as  by  private  parties  under 
government  inspectors. 

The  boards  of  control,  the  engineering  force,  inspectors, 
auditors,  etc.,  etc.,  who  would  look  after  the  administration 
of  the  canal's  construction,  very  properly  should  be  appointed 
by  the  President  and  approved  by  the  Senate.  But  after 
the  Board  of  Engineers  had  formulated  a  plan  of  construction 
and  had  it  approved  by  congress,  (the  business  end  of  our 
government)  advertisements  should  be  made,  and  invitations 
for  bids  extended  to  American  citizens,  and  the  lowest  bid 
accepted  either  for  the  whole  or  sections  of  the  canal. 

That  is  the  American  way  of  doing  things  and  it  is  far 
the  best;  some  way  or  other  the  citizens  of  the  United  States 
have  the  "get  there"  quality  better  developed  than  any  other 
people,  and  it  is  through  the  development  of  our  individuality 
that  our  great  success  has  come  about. 

A  contractor  looking  out  for  profit  will  listen  to  the 
inventor,  accept  his  improvements  and  have  them  in  operation 
years  before  the  inventor  could  get  them  before  a  government 
board. 

Different  sub-contractors  would  attempt  different  ways 
of  achieving  success  and  I  have  no  doubt  but  that  in  two 
years  time,  some  of  the  contractors  could  cut  in  two  any 
excavating  cost  which  could  be  brought  about  with  govern- 
ment labor,  and  still  make  money. 

Col.  Ernst  in  his  report  on  what  had  been  done  last  year 
says  that  the  cost  per  yard  averaged  from  43  cents  to  $1.02 
for  the  twelve  different  months  of  that  period. 

The  gross  result  at  Culebra  Cut  was  the  removal  of 
741,644  yards  of  which  96,052  was  rock,  254,252  soft  rock 
and  391,  340  earth. 

Mr.  Stevens  figures  this  to  be  58$  cents  per  yard  and 
a1  lows  1 6  cents  of  this  amount  for  "haul".  It  is  needless  to 
say  that  scientific  "dirt  handlers'  in  the  United  States  would 
gladly  take  a  contract  and  knock  off  the  odd  cents  shown 
above.  Mr.  Wallace  estimated  50  cents  as  a  fair  price  and 
he  was  right,  it  cou  d  be  contracted  at  that,  but  it  never  can 
be  done  with  government  paid  labor.  But  the  commission 


42  SOCIALISM  OR"EMPIRE. 

fails  to  add  to  the  above  an  enormous  sum  for  machinery 
repairs  and  expenses  now  paid  by  the  government,  which 
would  be  paid  by  the  contractors  if  the  business  was  carried 
on  in  a  business  way,  and  it  is  evident  that  with  governn  ent 
paid  labor  it  will  cost  75  cents  per  yard,  or  more.  It  would 
but  be  a  recurrance  of  what  has  always  occurred  in  public 
work.  Out  of  the  $8,095,092,  expended  prior  to  September 
30,  1905,  but  $1,010,104,  was  used  for  canal  construction, 
according  to  the  official  report,  and  the  following  items  which 
used  up  over  half  of  the  amount  expended,  never  should  have 
been  spent  at  all  by  the  government,  viz: 

Purchase  two  steamers $1,300,000 

Material  and  equipment 2,091,258 

Machine  shop  expenses 468,082 

Construction  and  repair  of  buildings 597,180 


$4,456,520 

Contractors  would  not  use  the  o1.d  material  they  are 
repairing  which  had  been  left  by  the  French  Company,  or 
the  new  dredges  purchased  by  the  government.  They  would 
install  better  ones  of  their  own  design.  The  construction 
of  buildings  costing  nearly  $600,000  should  about  enable 
them  to  put  all  the  work  "in-doors"  in  a  country  where 
timber  is  within  reasonable  distance.  The  purchase  of 
steamers  was  uncalled  for,  as  I  will  show  later.  Up  to  the 
present  time  the  canal  venture  has  been  turned  over  to  the 
administration,  and  neither  of  the  men  at  the  head  of  the 
executive  department  is  a  business  man. 

Our  able  President  certainly  never  has  had  a  day's  time 
for  the  practice  of  business  methods  and  our  Secretary  of 
War  is  an  able  lawyer;  both  honest  men,  but  as  easily  misled 
by  schemers  as  any  ordinary  "jay"  when  caught  out  of  their 
element. 

Their  time  is  so  taken  up  that  nearly  everything  done 
by  their  order,  is  not  considered  by  them;  they  merely  sign 
a  lot  of  prepared  papers  daily  laid  before  them  by  Secretaries. 

Before  the  congressional  committee  in  January,  one  of 
the  important  matters  called  to  the  attention  of  the  com- 
mittee where  a  clear  assumption  on  the  part  of  the  executive, 


PANAMA  CONTROL.  43 

of  powers  belonging  only  to  congress  had  occured,  the  Secretary 
of  War  acknowledged  that  is  was  wrong,  but  said  he  undoubt- 
edly had  signed  the  order. 

Another  instance  of  the  danger  of  imperial  management 
is  the  oil  contract  made  with  a  California  company. 

In  this  contract  it  appears  that  for  $500  per  month  paid 
into  a  school  fund  the  oil  company  receives  an  executive 
"concession"  to  lay  a  pipe  across  the  Isthmus  and  agree  to 
furnish  oil  at  90  cents  per  barrel  to  the  railroad  and  other 
work  requiring  power.  This  is  a  good  round  price  for  Cali- 
fornia fuel  oil  as  it  is  worth  but  20  cents  in  the  field,  but  it 
would  cheapen  the  operation  of  the  railroad  in  comparison 
with  the  use  of  coal. 

In  granting  this  concession  which  is  quite  in  line  with 
true  imperalism,  a  real  monopoly  was  created  by  our  Ex- 
ecutive Department  in  Panama,  at  the  very  time  that  the 
President  was  attacking  supposed  monopolies  in  the  United 
States. 

It  also  develops  one  of  those  ridiculous  differences 
between  officials  when  in  control  of  government  operations 
which  usually  ends  in  retaining  old  fashioned  methods. 

The  President  of  the  commission  condemns  its  use,  while 
the  chief  engineer  says  it  would  help.  The  President  of  the 
commission  knows  it  will  take  away  a  good  deal  of  tonnage 
from  our  line  of  steamers.  He  is  a  railroad  man  from  east 
of  the  Rocky  Mountains,  accustomed  to  the  use  of  coal,  and 
reports  to  the  President  that  a  reason  for  not  changing  to  oil 
would  be  that  native  firemen  could  not  be  instructed  how 
to  use  it.  Oil  is  used  generally  by  Pacific  Coast  Railroads 
and  if  a  native  fireman  could  not  learn  its  use  after  twenty- 
four  hours  instruction  he  would  not  be  a  safe  man  to  even 
ride  on  a  locomotive. 

If  the  government  is  allowed  to  purchase  millions  of 
dollars  worth  of  machinery  and  put  it  on  the  ground,  the 
object  of  asking  for  bids  will  be  defeated  and  cheap  construc- 
tion absolutely  prevented,  because  the  management  of  the 
canal,  to  prevent  criticism,  would  naturally  oblige  the  use 
of  the  machinery  purchased. 

The  canal  has  been  used  as  a  "plaything"  up  to  the 
present  time  and  it  is  drifting  into  government  hands  so  far 
that  it  will  be  hard  to  correct  the  mistake. 


44  SOCIALISM  OR  EMPIRE. 

Then  again  the  executive  department  has  shown  such 
an  evident  intention  to  do  the  work  its  own  way  that  con- 
tractors will  soon  fear  to  venture. 

The  American  plan  of  construction  under  contracts  let 
to  citizens  of  the  United  States  would  take  the  canal  out  of 
politics,  because  any  one  who  desired,  could  have  his  chance 
to  bid  and  if  successful  would  secure  the  work.  He  would 
employ  his  laborers  and  get  them  cheaper  than  ^the  depart- 
ment. He  could  even  import  women  as  the  commission  has 
done,  and  no  scandal  occur  to  our  government.  He  could 
work  four  hours  or  ten  without  infringing  on  any  law.  He 
could  hire  whom  he  chose,  and  not  have  a  civil  service  rule  to 
hamper  him. 

In  fact  contractors  would  construct  the  canal  for  two 
thirds  what  the  government  could  do  it  for  and  still  carve 
out  handsome  fortunes  for  themselves. 

It  is  wrong  for  our  government  to  import  laborers  on  a 
public  work  and  enforce  laws  against  her  own  citizens  to 
prevent  them  from  doing  the  same  in  the  United  States. 

Already  the  commission  demands  that  the  eight  hour 
law  be  suspended  on  this  government  work,  and  the  chief 
engineer  also  asks  that  our  silly  civil  service  rules  be  suspended 
on  the  Isthmus.  In  fact  the  executive  department  is  finding 
out  that  about  all  the  "reform"  laws  regarding  labor  are 
impracticable  when  any  great  work  is  to  be  accomplished. 
This  revelation  chagrins  the  socialist  but  makes  the  imper- 
ialist laugh. 

But  the  most  important  point  gained  would  be  the 
restriction  of  power  on  the  part  of  the  executive  department. 
The  canal  would  be  constructed  by  American  citizens  without 
a  complete  overthrowal  of  our  whole  system  of  government 
even  in  the  little  strip  across  the  Isthmus.  What  an  ac- 
knowledgement to  the  Kings  and  Emporers  of  the  world 
it  is,  for  us  by  our  action  to  say  that  a  Republican  form  of 
government  has  to  adopt  monarchial  systems  to  accomplish 
the  digging  of  a  ditch. 

The  first  move  made  by  the  executive  department  was 
a  mistake  when  the  President  called  on  a  lot  of  foreign  engi- 
neers to  consult  over  the  matter  While  American  engineers 
were  called  upon  to  operate  every  great  mine  clear  around 
the  world,  and  build  bridges  and  structures  and  accomplish 


PANAMA  CONTROL.  45 

engineering  feats  in  India,  Africa  and  on  the  Continent  itself ; 
how  strange  that  we  should  want  advice  on  such  a  job  as 
this.  We  have  a  ship  canal  owned  and  constructed  by  the 
United  States,  through  which  as  much  traffic  passes  each 
season  as  goes  across  the  Atlantic  Ocean,  and  it  was  an  insult 
to  our  civil  engineers  to  assume  that  they  needed  assistance. 

France  was  about  the  only  nation  having  had  experience, 
and  it  appears  that  it  would  be  better  not  to  do  anything 
they  would  recommend. 

If  this  American  canal  which  is  being  constructed  w  th 
American  money  cannot  be  built  by  American  brains  it  had 
better  not  be  built  at  all. 

If  the  government  will  but  give  the  contractor  a  "show," 
some  one  will  install  a  plant  of  machinery  there  that  will 
make  the  "Bucyrus"  95  ton  shovels,  and  the  great  bungling 
French  appliances  for  handling  dirt,  look  like  pigmies,  and 
the  time  of  construction  will  be  reduced  one-half. 

The  Panama  Canal  is  a  big  venture,  but  it  is  not  too  big 
for  our  enterprising  American  contractors  to  handle  success- 
fully, and  as  the  effort  to  construct  now  being  made  by  the 
executive  department  (and  forced  to  do  it  by  a  subservient, 
lazy  or  incompetent  congress)  is  accompanied  by  a  complete 
change  of  government  methods,  it  is  not  proper  to  continue 
the  experiment. 

It  should  be  changed  before  the  executive  department 
gets  in  so  deeply  as  to  oblige  the  people  to  stand  material 
loss  in  the  end. 

To  show  the  entire  lack  of  business  understanding  and 
reckless  disregard  for  constitutional  and  other  authority,  the 
ridicirous  currency  arrangement  entered  into  with  the  Bankers 
of  the  Isthmus  and  the  Republic  of  Panama  by  the  Secretary 
of  War,  is  an  instance.  The  Secretary  of  War  agreed  with 
the  Republic  of  Panama  to  maintain  the  value  of  the  Panama 
Peso  at  50  C.  gold  value.  Some  foolish  bankers  on  the  Isth- 
mus who  thought  silver  was  going  to  be  at  a  low  price,  agreed 
to  furnish  silver  when  wanted  on  ten  days  notice,  for  additional 
coinage.  Fortunately  for  these  bankers  their  contract  ex- 
pired April  29th,  1906,  as  the  silver  in  the  Panama  dollar  is 
now  worth  over  53  cents  gold,  and  the  Panama  dollars  are 
disappearing  from  circulation.  It  is  evident  the  bankers  would 
have  "gone  broke"  if  a  ten  year  contract  had  been  made,  and 


46  SOCIALISM  OR  EMPIRE. 

as  it  is  our  government  has  lost  all  of  the  money  used  in 
establishing  a  "standard  of  currency"  in  Panama.  In  the 
Commissioners'  report  to  congress  they  complain  of  a  scarcity 
of  money  in  Panama  and  say  the  silver  money  does  not 
circulate,  apparently  not  knowing  that  the  silver  was  worth 
more  as  bullion  than  as  coin. 

It  will  be  found  that  the  Panama  dollar,  the  Phillipine 
dollar,  and  the  Mexican  dollar  based  on  50  cents  gold  value, 
will  all  disappear  from  circulation,  unless  our  imperial  govern- 
ment makes  it  a  criminal  offence  for  a  man  to  leave  the  Panama 
or  Phillipine  reservations  with  silver  dollars  in  his  pocket. 

By  reading  over  the  powers  delegated  to  congress  by 
the  constitution,  it  will  be  noticed  that  the  Secretary  of  War 
or  the  President  had  no  business  to  make  any  such  arrange- 
ment; as  the  power  to  coin  money  or  regulate  the  value  of 
foreign  coin,  is  purely  a  congressional  duty,  and  if  this  matter 
had  been  left  with  congress  there  were  a  number  of  business 
men  in  that  body  who  would  have  called  attention  to  such  a 
possibility. 

Mr.  Sibley  of  Pennsylvania  and  forty  other  congressmen 
would  have  explained  this  matter  and  saved  the  display  of 
lack  of  business  understanding  evidenced  by  the  action 
taken  by  the  government. 

However,  this  vast  American  business  enterprise  is  now 
going  on  in  un-American  ways,  and  the  people  will  have  to 
pay  the  loss. 

NOTE:  After  the  foregoing  chapter  had  been  incorporated  in  this 
book  in  such  away  that  it  was  not  advisable  to  change,  I  note  by  newspaper 
information,  that  the  Executive  Department  has  determined  that  it  is 
impracticable  for  it  to  construct  the  canal  with  government  employees, 
and  is  asking  for  bids  on  the  work. 

In  this  call  for  bids  the  very  difficulty  which  I  explained  is  made  ap- 
parent. 

The  Commission  clearly  demands  that  contractors  use  the  machinery, 
railroad  and  steamship  lines  it  has  purchased,  and  in  addition  obliges  the 
contractors  to  utilize  the  labor  contracted  by  it. 

It  restricts  contractors  from  discharging  the  "gold  list"  men  employed 
without  the  consent  of  the  commission,  and  clearly  indicates  to  contractors 
that  all  cement,  explosives,  oil,  coal  and  other  fuel  or  electricity  used  ust 
be  purchased  through  the  Commission  and  the  repairs  on  machinery  made 
by  the  Commissions  employees. 

The  commission  indicates  that  it  will  charge  15  per  cent  above  ex- 
penses for  repair  work,  but  do  not  state  what  will  be  done  on  supplies. 

Through  the  government  ownership  of  the  railroad  and  the  machinery 
a  contractor  could  be  made  rich  or  a  pauper  at  the  whim  of  the  government 
employers. 

The  call  for  bids  is  supposed  to  come  late  in  October  and  close  early 


PANAMA  RAILROAD  AND  STEAMSHIPS.  47 


CHAPTER  VI. 

PANAMA  R.  R.  AND  STEAMSHIPS. 

The  apathy  with  which  congress  views  the  governmental 
experiment  in  canal  construction,  railroad  and  steamship 
business  and  governmental  control  of  everything  in  Panama, 
is  one  of  the  remarkable  political  errors  of  the  times. 

It  would  appear  that  congress  and  the  administration 
was  attempting  to  prove  by  experiment  the  value  of  a  govern- 
ment along  imperial  or  socialistic  lines  of  thought. 

The  effort  will  be  heralded  by  stump  speakers  and  publica- 
tions which  advocate  public  ownership  and  control  of  every- 
thing, as  proof  of  their  position.  In  addition  to  absolute 
control  of  the  canal  zone  the  administration  has  been  allowed 
by  congress  to  practically  drive  every  private  enterprise  away 
from  the  venture,  so  that  under  the  present  management  only 
employees  of  the  government  are  allowed  to  assist  in  con- 
struction, or  receive  benefits  therefrom. 

It  never  was  intended  that  the  government  of  the  United 

in  December,  so  that  any  great  contracting  firm  who  had  not  received  a 
"tip"  in  regard  to  this  change  of  policy  could  not  enter  into  the  competition. 

Ridiculous  rumors  of  a  Belgian  company  taking  the  contract  is  already 
heard,  as  though  the  government  of  the  United  States  could  make  a  con- 
tract with  any  but  American  citizens  in  such  a  venture. 

It  evidently  was  allowed  to  circulate  with  a  view  of  deceiving  some 
American  company  into  entering  into  the  competition,  because  it  would 
create  scandal  to  have  bids  received  only  from  persons  who  have  been 
closely  allied  with  the  officials  at  Panama  or  Washington. 

If  the  railroad  and  steamship  lines,  and  the  machinery  had  not  been 
purchased  by  the  government,  responsible  contractors  could  do  the  work, 
and  do  it  their  own  way,  and  at  a  price  which  would  pay  back  to  the  people 
of  the  United  States  their  money  if  they  would  sink  the  steamers,  blow  up 
up  the  railroad,  and  throw  the  machinery  into  the  §ea.  The  class  of  con- 
tractors who  would  accept  the  proposition  as  presented  are  merely  per- 
centage grafters  on  labor,  and  not  the  kind  of  contractors  who  do  great 
things. 

It  will  be  found  that  this  attempt  to  have  our  government  "do  business" 
will  but  repeat  the  failures  of  the  past. 

Because  of  Congress  having  failed  to  do  its  duty  in  this  matter  it  is 
evident  that  the  people  will  lose  many  millions  in  money. 


48  SOCIALISM  OR  EMPIRE. 

States  should  enter  into  competition  with  its  citizens  in  any 
business  venture,  and  it  is  against  public  policy  to  commence 
the  attempt  at  the  present  time.  Then  again,  it  is  expensive, 
and  the  results  already  show  that  it  is  wrong. 

The  usual  results  of  public  ownership  or  purchase  are 
already  shown  in  this  transaction,  and  as  the  work  progresses 
the  cost  to  the  people  will  only  increase. 

One  of  the  first  wrong  moves  was  the  purchase  of  the 
railroad  and  line  of  steamers  connected  therewith. 

The  government  was  swindled  in  the  purchase  of  the 
railroad  and  it  had  no  business  to  buy  the  steamers 

The  purchase  of  the  railroad  at  practiaclly  $60,000  per 
mile,  when  bonded  debt  is  considered,  and  the  fact  that  its 
track  and  equipment  at  the  time  was  practically  of  the  third 
class  (nearly  obsolete)  is  proof  that  the  government  paid 
much  more  than  it  was  worth,  and  the  subsequent  action 
of  the  commission  in  lending  money  of  the  United  States  to 
the  railroad,  and  making  contracts  for  things  unheard  of 
before  in  government  financial  transactions,  make  the  rail- 
road venture  one  that  certainly  will  discredit  all  concerned. 

There  is  no  doubt  but  what  someone  made  a  good  com- 
mission out  of  the  deal,  and  it  was  one  in  which  the  govern- 
ment should  not  have  taken  part.  It  tends  to  prevent 
private  capital  from  venturing  in  any  part  of  the  vast  under- 
taking; because  the  ordinary  contractor  knows  what  a  crank 
a  government  officer  can  be  when  in  charge  of  such  a  property. 

If  a  private  citizen  should  want  any  accommodation  the 
mosquitos  would  eat  him  up  before  he  could  get  his  card 
carried  in  to  the  Poo-Bah  in  charge.  It  would  have  been 
much  better  to  have  let  the  railroad  alone  and  if  it  did  not 
furnish  service,  give  a  charter  to  another  company  to  build 
a  competing  line. 

A  corporation  could  do  the  work  for  half  the  money 
it  will  cost  the  government  and  make  money. 

To  show  how  "government  control"  works,  the  opera- 
tion of  this  railroad  is  a  fair  example.  In  1904  but  50.58 
per  cent  of  the  earnings  went  into  expenses;  in  1905  it  took 
63.45  per  cent,  and  for  the  four  months  ending  October  ist, 
1905,  it  actually  cost  76.78  per  cent,  of  freight  receipts  to 
pay  operating  expenses. 

In   1905  although  the  rate  per  ton  averaged   14  cents 


PANAMA  RAILROAD  AND  STEAMSHIPS.  49 

more  on  freight  hauled,  and  the  commercial  business  increas- 
ed 83  per  cent,  the  railroad  earned  $98.058  less  than  the  year 
before. 

Like  every  other  government-owned  venture,  the  offi- 
cers and  civil  service  employees  will  soon  think  the  road  is 
run  for  their  pleasure  and  that  it  would  be  a  disgrace  for 
them  to  work. 

The  commission  reports  that  the  average  charge  per 
ton  per  mile  for  freight  hauled  over  the  Panama  railroad 
is  7.07  cents,  while  the  reformers  and  the  President  ask  con- 
gress to  "regulate"  rates  in  the  United  States  where  the 
average  is  0.76  of  a  cent,  or  only  one-tenth  that  charged 
by  the  Panama  government-owned  railroad.  It  is  fortu- 
nate for  the  government  that  this  road  is  out  of  the  juris- 
diction of  the  Inter  State  Commerce  Commission,  if  a  law 
is  passed  giving  them  power  to  decide  what  a  reasonable 
rate  should  be;  because  this  is  about  the  most  unreasonable 
rate  on  the  American  continent,  and  after  the  payment  of 
5  per  cent,  dividend  on  the  capital  stock  it  only  passed  $4,- 
248.50  to  profit  and  loss  account  for  the  ten  months  ending 
October  3ist,  1905. 

The  officers  in  charge  of  the  railroad  evidently  forgot 
that  they  were  government  employees  working  for  the  peo- 
ple of  the  United  States  and  at  one  time  published  the  fact 
that  if  they  could  not  get  steel  and  material  at  a  satisfactory 
price  from  the  United  States  they  would  buy  it  in-  Europe 
and  save  a  few  dollars  thereby.  This  threat  coming  from 
the  employees  of  a  people  who  maintain  a  protective  tariff, 
with  a  view  of  keeping  our  money  at  home  and  employing 
American  labor  at  high  wages,  was  a  ridiculous  proposition. 

Congress  should  if  necessary,  pass  a  law  that  these  men 
cannot  buy  a  thing  except  from  citizens  of  the  United  States 
the  same  as  in  our  other  departments. 

While  it  was  a  bad  move  to  purchase  the  Panama  Rail- 
road, it  was  worse  to  buy  and  attempt  to  run  lines  of  steam- 
ers in  conjunction  therewith. 

In  the  original  trade  with  the  Panama  Railroad  Company 
the  government  bought  three  steamers  and  a  lot  of  tugs  and 
lighters  paying  $640,906.80  for  what  had  been  reported  in 
Poor's  Manual  as  being  worth  $585,556.  In  the  floating 
equipment  there  were  three  steamers  the  "Advance",  "Fi- 


50  SOCIALISM  OR  EMPIRE. 

nance"  and  "Allianca"  which  were  inventoried  as  worth 
$370,169.27  but  on  which  the  government  in  the  last  two 
years  has  expended  $392,330.39  for  repairs,  which  would 
almost  warrant  the  conclusion  that  this  was  not  a  good  pur- 
chase, and  one  that  a  private  corporation  would  have  rejected. 

Succeeding  this  the  commission  has  purchased  two 
other  steamers  paying  $650,000  apiece  for  them  and  has 
leased  them  to  the  Panama  railroad  at  an  annual  rental  of 
$52,480  each. 

We  now  come  to  the  most  extraordinary  feature  of  the 
government  attempt  to  do  all  the  business  connected  with  the 
canal.  The  commission  in  its  report  to  congress  felicitates 
itself  over  having  been  able  to  contract  with  the  Royal  Mail 
Steam  Packet  Company  and  the  Hamburg  American  line 
(both  foreign-owned  steamship  lines)  for  service  between 
New  York  and  Colon,  increasing  the  business  of  the  railroad 
by  the  transaction. 

They  also  say  there  are  strong  indications  that  Chili 
and  Peru  will  subsidize  steamers  to  work  in  co-operation 
with  "our"  Panama  railroad  and  they  go  on  and  say  that 
the  co-carriers  are  authorized  to  fix  competitive  rates  to 
secure  business' '  an  agreed  percentage  of  such  through  rates 
to  accrue  to  the  company"  and  that  they  have  advertised 
this  fact  and  feel  disappointed  that  no  reply  has  been  made 
to  their  request. 

One  of  the  few  American  owned  lines  of  steamships 
is  the  Pacific  Mail.  It  is  owned  by  American  citizens  and 
although  it  has  lines  of  steamers  running  to  China  and  Japan, 
it  also  maintained  a  line  to  Colon  from  New  York  and  from 
Panama  to  San  Francisco.  Competing  as  it  must  with  the 
Canadian  line  of  steamers  which  receives  a  subsidy  of  $300,- 
ooo  per  year  from  the  Canadian  Government  for  running 
one  ship  a  month  to  Oriental  ports,  its  trans-Pacific  business 
pays  but  a  small  profit.  Its  business  from  New  York  to 
San  Francisco  is  limited  in  amount,  through  fierce  compe- 
tition of  our  trans-continental  lines,  and  the  result  is  that 
its  stock  sells  under  $50.  per  share  and  has  been  as  low  as 
$17.  in  the  past  few  years. 

It  has  paid  no  dividend  for  several  years  and  has  a  hard 
time    to    keep    even. 

In  1902  it  made  a  profit  of  $16,846.75  out  of  a  ten  mil- 
lion dollar  investment  and  in  1903  $323,103.53. 


PANAMA  RAILROAD  AND  STEAMSHIPS.  51 

Prior  to  1892  the  transcontinental  roads  paid  this  Com- 
pany $75.000  per  month  as  a  bonus  to  keep  them  from  mak- 
ing rates  so  low  as  to  prevent  the  railroads  from  charging 
a  price  which  they  thought  necessary  to  carry  the  busines 
across  the  continent;  but  the  increase  of  traffic  now  received 
by  the  transcontinental  lines  enables  them  to  make  rates, 
paying  no  attention  to  the  water  route,  the  same  as  is  done 
by  our  eastern  roads  in  competition  with  river  or  lake 
transportation. 

The  acceptance  of  that  subsidy  prejudiced  many  against 
the  Pacific  mail,  but  the  people  certainly  do  not  want  the 
government  to  enter  into  a  direct  competition  with  a  set 
view  of  destroying  one  of  the  few  American  lines  of  steamers. 

It  would  be  an  expensive  undertaking  because  the  same 
reckless  increase  of  expenses  is  already  shown  in  the  steam- 
ship venture,  as  is  shown  on  the  railroad. 

We  find  that  while  the  freight  carried  increased  39  per 
cent,  between  the  years  1904  and  1905  that  the  expenses 
pertaining  to  the  steamships  owned  by  the  government 
increased  48  per  cent. 

The  handling  of  coal  and  cargo  cost  50  per  cent,  more 
than  the  year  before,  (in  1904  it  was  $138,063.62,  in  1905, 
$185,451.15) 

Even  the  wages  paid  sailors  increased  from  $118,025.10 
to  $154,123.40.  In  addition  to  the  above  the  commission 
has  relieved  the  Panama  railroad  from  dredging,  so  that 
the  canal  expenses  really  cover  thousands  of  dollars  which 
would  be  paid  by  a  private  owned  steamship  line. 
The  President  of  the  commission  reports  that  "the  larger 
tonnage  carried  by  our  steamships  out  from  New  York  is 
attributable  to  a  gradual  development  in  commercial  traffic 
by  our  line  etc.,  etc."  and  winds  up  with  the  remark  "that 
the  advisability  of  chartering  one  or  two  large  cargo  boats 
to  carry  heavy,  bulky  construction  material  and  equipment 
to  the  Isthmus  for  the  commission"  and  railroad  company, 
is  under  consideration." 

These  men  are  carried  away  by  the  power  given  them, 
and  are  actually  allowing  the  government  to  enter  into  di- 
rect competition  with  citizens  of  the  United  States  in  ocean 
transportation.  It  is  a  violation  of  the  rights  of  the  citizen 
reserved  to  the  people  under  our  constitution. 


52  SOCIALISM  OR  EMPIRE. 

The  congress  itself  cannot  enter  into  a  transportation 
business  and  crowd  out  personal  endeavor. 

The  assumption  that  ships  cannot  be  secured  or  chart- 
ered from  American  citizens  to  do  this  business  is  puerile, 
and  a  fraud  on  the  public.  If  bids  were  asked  for  in  the 
regular  way  the  freight  wanted  by  the  canal  could  be  con- 
tracted at  25  per  cent  less  than  what  it  would  cost  in  gov- 
ernment owned  ships,  and  it  would  help  increase  our  mer- 
chant navy,  an  object  so  -much  desired. 

If  the  repairs  are  included  in  the  expense  of  operation 
it  can  be  seen  that  private  shipping  could  have  carried  the 
traffic  between  New  York  and  Colon  for  one-half  what  it 
had  cost  the  government,  and  at  that  made  a  profit.  The 
War  department  in  owning  and  operating  a  line  of  transports, 
and  now  operating  this  line  of  steamers  is  doing  what  the 
people  of  the  United  States  should  condemn. 

Great  stress  is  laid  in  some  quarters  on  the  decline  of 
our  merchant  marine,  and  here  at  Panama  and  in  the  trade 
to  the  far  Phillipines,  our  executive  department  is  operating 
lines  of  steamers  at  the  cost  of  the  tax  payers  and  driving 
out  our  merchant  marine  from  two  prospective  profitable 
fields  of  operation. 

All  maritime  nations  encourage  private  owned  lines, 
and  most  of  them  pay  subsidies,  and  to  meet  the  needs  of 
war,  contract  with  the  lines  for  conversion  of  steamers  into 
cruisers  and  transports  when  necessary;  but  it  appears  that 
we  attempt  by  government  competition  to  drive  private 
owned  steamships  out  of  business. 

If  the  complete  expense  attendant  to  one  year  's  oper- 
ation of  a  government  transport  is  figured,  it  will  be  found 
that  it  would  be  cheaper  to  send  all  our  soldiers  by  first  class 
cabin  passage  to  the  Phillipines  and  pay  the  freight  charged 
by  commercial  lines  on  supplies  and  in  the  Panama  affair, 
once  the  red  tape  "do  nothing,"  government  style  gets  fully 
started,  the  expense  will  be  double  what  chartered  ships 
would  gladly  contract  for  delivery.  A  ten  years  contract 
could  today  be  made  with  responsible  private  parties  at  a 
price  that  would  make  a  profit  for  the  people,  if  every  govern- 
ment owned  ship  now  competing  with  private  ventures  in 
business,  were  scuttled^and  left  on  the  bottom  of  the  sea. 

Because   the   government   may   need   transportation   at 


PANAMA  RAILROAD  AND  STEAMSHIPS.  53 

some  future  time  it  is  ridiculous  to  attempt  to  keep  a  fleet 
of  steamers  in  commission.  Japan  had  a  great  naval  war 
and  withdrew  her  passenger  steamers  for  the  emergency,  but 
all  are  back  again  to  work. 

I  do  not  make  this  criticism  in  any  way  personal  as  to 
men.  It  is  the  system  which  is  wrong. 

It  is  against  our  public  policy;  developed  through  nearly 
one  hundred  and  twenty  years  success. 

The  founders  of  our  government  did  not  believe  in  the 
government  doing  any  kind  of  business,  especially  in  com- 
petition with  private  endeavor,  and  while  this  canal  is  a  great 
big  business  proposition,  it  is  not  so  big  as  to  warrant  this 
nation  in  violating  every  principle  dear  to  our  institutions. 

The  whole  plan  as  at  present  operated  is  but  sowing 
the  wind  that  will  bring  the  whirlwind  as  a  harvest.  It 
is  wrong  in  either  a  business  or  political  sense,  and  congress 
should  assume  its  duties  regarding  this  public  venture,  and 
not  let  the  executive  department  speculate  in  construction 
work  and  steamship  and  railroad  transportation  and  oblige 
the  people  to  pay  losses,  if  any  occur. 

There  is  no  reason  why  we  should  depart  from  our  sys- 
tem of  governmental  operations  on  account  of  the  canal. 
Congress  should  limit  the  executive  department  to  the  duty 
of  executing  the  laws  and  not  allow  it  to  operate  any  branch 
of  business  or  compete  with  private  enterprise,  in  any  busi- 
ness undertaking. 

The  construction  of  the  Panama  canal  is  a  business 
undertaking,  and  should  be  separated  from  political  man- 
agement. 


54  SOCIALISM  OR  EMPIRE. 


CHAPTER  VII. 

RATE  REGULATION.  . 

The  movement  which  has  resulted  in  a  law  attempting 
to  regulate  and  name  rates  on  railroads,  is  one  of  the  re- 
sults of  the  socialistic  agitation  going  on  in  this  country. 

Socialism  and  Empire  have  so  many  interests  in  common 
that  the  supporters  of  these  two  theories  have  converging 
lines  of  thought. 

The  Socialist  desires  that  power  to  control  capital  be 
placed  in  the  hands  of  an  Executive  of  his  choice,  and  an 
Empire  desires  the  same  power  for  personal  ends. 

To  the  owner  of  property  either  control  would  amount 
to  nearly  the  same  thing.  In  all  Republics  which  have 
ended  in  Empire  the  Executive  has  assisted  the  socialist 
in  his  desire,  until  the  time  should  come,  for  him  to  place 
the  yoke  of  submission  on  his  neck. 

The  sentiment  which  has  culminated  in  this  first  in- 
tentional defiance  of  the  Constitution,  was  manufactured 
by  two  influences — maudlin  socialism  and  Executive  manip- 
ulation. 

This  issue  was  forced  on  a  Congress  elected  as  conser- 
vative Republicans  through  deceit  of  a  branch  of  the  Ex- 
ecutive Department,  and  the  House  of  Representatives 
under  whip  and  spur  voted  on  a  question  never  referred  to 
the  people  or  understood  by  them,  as  being  an  issue  in  any 
campaign.  Of  course,  every  Socialist  in  the  country  ap- 
plauds the  action  because  it  is  the  entering  wedge  which 
they  expect  will  rend  our  written  constitution  and  enab-e 
government  to  control  and  ultimately  operate  everything. 
This  action  being  a  direct  blow  at  the  constitutional  rights 
of  property  owners  guaranteed  to  us  by  our  forefathers, 
is  so  important  that  I  give  in  succeeding  chapters  details 
in  regard  to  results  of  government  control  of  business  affairs 
not  generialy  known  and  understood. 


RATE  REGULATION.  55 

It  is  a  political  mistake  attempted  without  considera- 
tion by  the  people. 

The  remarkable  thing  which  it  develops,  is  the  fact  that 
a  sentiment  can  be  "worked  up"  by  a  branch  of  the  execu- 
tive department  entirely  un-American  in  thought,  and  when 
urged  upon  congress  by  the  President,  it  passes  the  lower 
house  with  a  dozen  unconstitutional  features,  and  when 
trimmed  down  and  amended  by  the  senate,  still  violates 
the  most  sacred  principle  of  our  form  of  government. 

Placing  an  initiative  control  of  private  owned  property 
in  the  hands  of  a  commission  appointed  by  the  President 
(and  thus  an  adjunct  of  the  executive  department)  was  never 
intended  by  the  framers  of  our  constitution. 

The  whole  agitation  can  be  traced  to  the  members  and 
employees  of  the  Inter  State  Commerce  commission. 

By  persistent  "lobbying"  at  both  ends  of  Pennsylvania 
avenue  this  commission,  under  pay  of  the  people  has  mis- 
represented the  interests  they  were  supposed  to  assist.  |* 

Thev  have  caused  to  be  published  many  articles  at- 
tacking the  railroad  interests  and  favoring  the  Commission's 
demand  for  increased  power.  They  have  distributed  blank  pe- 
titions for  signature  and  sent  out  sets  of  resolutions  ready 
for  adoption  by  meetings  called  through  their  suggestion, 
in  an  attempt  to  make  it  appear  that  "the  people"  de- 
manded the  change.  They  asked  to  be  made  the  final  judge 
regarding  what  a  reasonable  rate  for  a  locality,  or  between 
railroads  and  shippers  should  be,  and  that  a  practical  regu- 
lation of  traffic  affairs  be  placed  with  them,  with  power 
to  order  enforcement  of  their  decision.  The  commission 
obtained  the  ear  of  the  President,  and  he  has  joined  with 
them  in  asking  that  this  power  be  placed  in  the  hands  of 
the  executive  department. 

Taken  in  conjunction  with  the  gradually  growing  ten- 
dency of  that  department  to  take  to  itself  powers  beyond 
those  intended  by  the  founders  of  our  government,  it  cer- 
tainly should  cause  alarm. 

The  creation  of  this  commission  in  the  first  place  was 
a  joke.  A  "Farmers'  Alliance"  craze  had  caused  several 
states  to  become  uncertain  politically,  and  the  party  in  power 
for  the  time  being,  thought  that  by  apparently  complying 
with  the  demand  of  the  "people"  (who  from  present  ap- 


56  SOCIALISM  OR  EMPIRE. 

pearances  have  all  died)  they  could  definitely  attach  that 
element  to  their  party,  if  a  law  were  passed  creating  the 
Inter  State  Commerce  Commission. 

It  was  not  supposed  by  any  one  that  the  Commission 
would  assume  to  interfere  with  the  handling  of  the  railroads 
of  the  country,  and  Mr.  Cleveland  in  appointing  the  first 
commission  used  it  as  a  graveyard  for  politicians  whose 
star  had  set,  or  as  a  compliment  to  friends  in  the  opposite 
party  who  had  assisted  in  political  changes. 

It  was  supposed  that  this  commission  would  compile 
statistics  which  would  be  of  value,  and  hear  complaints 
made  by  communities  and  shippers  and  if  any  material  wrong 
was  being  committed  the  attention  of  the  courts  would  be 
called  to  the  matter  and  suits  brought  to  correct  the  same. 

During  the  past  few  years  through  changes  brought 
about  by  executive  appointment,  and  the  activity  of  several 
employees  of  the  commission  they  have  taken  themselves 
very  seriously,  and  the  same  as  in  nearly  all  of  our  executive 
departments,  they  have  been  allowed  to  gradually  crowd 
themselves  into  a  wrong  position. 

Through  incapacity  or  carelessness  they  have  not  been 
successful  in  having  the  courts  confirm  their  decisions,  or 
order  the  railroads  to  do  what  they  thought  should  be  done, 
and  their  idea  is  to  have  power  enough  given  them  to  enforce 
rates  and  rules  without  the  intervention  of  the  courts. 

For  a  commission  constituted  as  this  has  been,  of  politi- 
cal castaways  or  superannuated  lawyers,  it  is  strange  that 
they  should  have  made  such  a  record  in  the  courts,  because 
of  lawyers  being  on  the  commission  and  no  railroad  men. 
The  members  of  the  commission  trying  to  follow  the  lead 
of  Germany,  France,  England  and  Canada,  could  not  get  it  into 
their  heads  that  under  our  constitution  private  citizens 
retained  the  initiative  in  business  matters,  and  they  con- 
tinually made  attempts  to  order  changes  which  affected 
property  rights. 

Their  record  in  the  courts  naturally  was  a  succession 
of  failures.  Since  the  organization  of  the  commission  to 
the  end  of  the  year  1903,  sixteen  cases  had  come  up  to  the 
Supreme  Court  of  the  United  States  and  they  were  beaten 
in  all  except  one,  and  that  only  allowed  part  of  their  conten- 
tion. 

In  the  various  circuit  courts  of  appeal  in  sixteen  cases 


RATE  REGULATION.  57 

in  which  the  commission  asked  that  their  orders  be  obeyed, 
they  succeeded  in  getting  a  decision  in  that  division  of  our 
courts  in  four  cases,  and  the  supreme  court  reversed  those 
four  decisions  on  appeal. 

In  the  circuit  courts  of  the  United  States  out  of  31  cases 
tried,  they  lost  in  all  except  seven,  and  on  appeal  all  but  one 
of  these  cases  were  reversed. 

With  such  a  record  as  this  it  is  strange  that  such  a  body 
of  men  should  ask  more  power.  Their  absolute  failure  to 
fulfill  the  duties  already  placed  upon  them,  or  to  grasp  the 
fact  that  the  creation  of  the  commission  itself  was  merely 
a  sop  to  a  morbid  section  of  the  public  on  the  part  of  a  schem- 
ing combination  in  congress,  would  prove  that  they  were  un- 
fit to  assume  affirmative  control  of  any  great  venture. 

They  had  proved  their  lack  of  understanding  of  the 
law,  and  a  lack  of  political  perception  almost  childlike. 

The  commission  in  their  suits  at  law  were  defeated  be- 
cause they  attempted  to  take  initiative  action  or  attempted 
the  control  of  property  of  citizens.  They  appeared  to  per- 
sistently overlook  the  fact  that  courts  can  correct  wrongs, 
but  cannot  order  a  future  use  of  corporation  or  private  prop- 
erty. 

The  safeguards  thrown  around  our  ownership  of  prop- 
erty by  the  constitution  in  words,  when  the  intent  of  the 
framers  thereof  is  considered,  recognizing  that  the  nation 
came  into  existence  through  a  protest  against  government 
control  of  private  affairs,  should  naturally  place  the  courts 
as  barriers  to  such  aggression. 

The  327,000  owners  of  railroad  shares  of  record,  and 
the  other  millions  of  people  interested  in  railroad  property 
through  savings  banks  and  insurance  investments,  have  a 
right  under  the  constitution  to  retain  control  of  their  proper- 
ty and  are  guaranteed  under  that  instrument  from  undue 
investigation  or  seizure.  Congress  itself  is  prohibited  from 
taking  powers  not  delegated  to  it  by  the  constitution  and 
it  should  be  restrained  from  an  attempt  to  take  initiative 
control  of  any  private  owned  property.  If  a  constitutional 
amendment  was  offered  changing  the  guarantee  given  prop- 
erty owners  in  that  instrument,  not  three  states  in  the  Union 
would  vote  for  it,  as  it  would  be  explained  during  a  political 
canvass,  that  the  privacy  and  safety  guaranteed  by  our 


58  SOCIALISM  OR  EMPIRE. 

constitution  from  government  or  other  forms  of  seizure  or 
investigation,    is   the   greatest    "liberty"    we    possess. 

The  present  agitation  has  been  engineered  by  the  ex- 
ecutive ^department  of  our  government,  through  the  ac- 
tivities of  this  commission  and  the  executive  himself.  It 
but  panders  to  the  same  kind  of  "people"  who  made  the 
Farmers'  Alliance  great  twenty  years  ago,  combined  at  the 
present  time  with  the  labor  unions,  which  have  become  tinged 
with  socialism,  and  the  socialists  themselves.  When  the 
thinking  people  who  cast  their  votes  for  the  public  good, 
understand  the  question  they  would  not  advocate  such  an 
encroachment  on  personal  or  corporate  rights  as  is  advocat- 
ed by  this  movement. 

The  commission  claimed  that  the  intent  of  the  law  mak- 
ers who  created  the  Inter  State  Commerce  Commission, 
had  been  misconstrued  by  the  courts,  and  asked  that  power 
be  given  them  to  act  without  the  courts  approval.  They  have 
used  peculiar  expressions  in  public  utterances  on  the  sub- 
ject; saying  the  courts  had  "defeated  the  purposes  of  the 
act"  they  charge  the  courts  with  having  "elminated",  strick- 
en from  the  act"  and  "seriously  weakened  by  judicial  inter- 
pretation" the  force  of  the  Inter  State  Commerce  law,  and 
assert  that  the  judicial  branch  of  the  government  has  "emas- 
culated" the  act  etc.,  etc.  They  called  on  the  Legislative 
branch  of  the  government,  to  join  the  executive  branch  and 
pass  a  law  taking  the  power  of  review  from  the  courts;  and 
the  lower  branch  of  congress,  under  fear  of  executive  dis- 
pleasure, servilely  agreed  to  this  clearly  unconstitutional 
proposition. 

*It  was  fortunate  for  the  bill  itself  and  for  the  people 
that  the  senate  threw  out  the  monstrous  proposition,  but 
it  would  have  been  better  to  have  defeated  the  bill  entire, 
as  the  whole  movement  on  the  part  of  the  executive  depart- 
ment has  been  one  of  false  pretense. 

The  pretended  demand  of  the  people;  the  pretended 
charge  of  unfair  rates;  the  pretended  demand  for  initiative 
power  on  the  part  of  the  President  in  the  interest  of  the 
"people"  when  in  fact  it  was  intended  to  be  used  as  a  club 
over  the  great  railroad  interests  of  the  country,  making 
them  subservient  to  executive  authority  and  domination; 
are  all  a  fraud.  In  fact  the  rate  regulation  nonsense  was 


RATE  REGULATION.  59 

engineered  by  the  executive  department  with  a  view  of 
building  up  additional  power  on  the  part  of  the  executive, 
although  that  department  had  already  become  top-heavy 
through  the  cowardice  or  ignorance  of  congress. 

The  action  taken  by  the  lower  branch  of  congress  shows 
that  we  face  a  danger  to  the  Republic.  This  legislation  was 
"ordered"  by  the  President,  claiming  to  represent  the  "peo- 
ple", when  in  fact  the  whole  expression  of  public  opinion 
was  manufactured  by  the  Inter  State  Commerce  Commission 
(an  adjunct  of  the  Executive  Department.) 

Senators  and  representatives  who  mildly  protested  that 
the  legislation  was  not  for  the  best  interests  of  the  Republic 
lost  favor  at  the  White  House. 

The  Congress  wrongfully  has  built  up  the  executive 
power,  so  that  a  representative's  efforts  in  congress  will  re- 
sult in  success  or  failure  in  proportion  to  his  loss  of  manhood 
and  servile  obedience  to  the  orders  of  the  President  and  the 
Speaker.  In  this  rate  regulation  controversy,  a  bill  repug- 
nant to  every  Republican,  a  clearly  populistic,  socialistic 
and  vicious  measure,  was  passed  nearly  unanimously  by  the 
House,  although  filled  with  unconstitutional  provisions, 
because  the  Republicans  fear  the  President  and  the  Democrats 
want  to  disgust  every  property  owner  in  the  United  States 
with  the  party  in  power.  A  danger  to  our  institutions  is 
presented  when  an  executive  recommends  that  courts  should 
not  interfere  with  an  executive  commission's  action;  and  to 
have  one  branch  of  the  legislative  department  follow  the 
suggestion;  it  plants  a  sign  board  which  points  to  Empire. 

A  manufactured  demand  of  the  "people"  could  be  worked 
up  by  the  executive  staff  in  behalf  of  a  twenty  year  term 
of  office  for  a  popular  President  and  petitions  much  larger 
than  those  presented  by  the  Inter  State  Commerce  Com- 
mission could  be  obtained. 

With  this  done  should  the  President  after  securing  power 
to  regulate,  control  and  intimidate  all  of  the  great  corporate 
and  private  interests  of  the  country,  with  the  Army  and  Navy 
at  his  back  and  a  congress  such  as  the  one  of  1906,  which  blind- 
ly follows  orders  irrespective  of  the  constitution  or  any- 
thing else,  see  fit  to  grasp  power,  our  national  political  troubles 
could  be  settled  for  the  balance  of  my  natural  life. 

We   would   have   a   Dictator. 

The  question  as  to  whether  we  want  inquisitorial  investi- 


60  SOCIALISM  OR  EMPIRE. 

gation  of  business  affairs  and  government  control  of  utilities, 
should  be  presented  in  the  form  of  a  constitutional  amend- 
ment and  voted  on  by  the  people,  but  in  justice  to  every 
interest,  the  executive  and  congress  should  not  attempt 
"to  get  around  the  constitution"  by  the  use  of  vague  lan- 
guage, or  attempts  to  deprive  the  judiciary  from  partak- 
ing of  their  part  in  government. 

If  the  people  want  to  give  back  to  the  Executive  the 
power  taken  away  by  our  Revolutionary  War  it  should  be 
left  them  to  decide;  it  is  wrong  for  the  President  and  Con- 
gress to  take  that  power  through  tricks  of  legislation. 

This  law  even  as  amended  by  the  Senate  takes  away 
from  a  great  class  of  investors  their  rights  gained  through 
the  war  of  the  Revolution,  and  it  is  small  satisfaction  to  the 
people  who  lose  control  of  their  property,  to  retain  the  right 
to  "holler"  and  publish  their  troubles  in  the  "press." 


POWERS  REQUESTED.  61 


CHAPTER  VIII. 

POWER  REQUESTED  BY    INTER    STATE    COMMERCE    COM- 
MISSION AND  PRESIDENT. 

In  the  last  chapter  I  have  called  attention  to  the  mem- 
bers of  the  Commission's  criticism  of  the  courts  and  that  this 
criticism  was  brought  about  through  the  fact  that  in  every  at- 
tempt to  make  railroads  adopt  their  ideas  of  management  or 
regulation  affecting  profit  and  loss,  which  would  naturally  affect 
the  ownership  of  the  property  adversely,  the  courts  over- 
ruled them.  Is  is  useless  to  say  that  in  the  opinion  of  ninety- 
nine  business  men  out  of  one  hundred  the  courts  were  right. 
In  the  first  reports  of  the  Inter  State  Commerce  Commission 
it  stated  that  "the  Commission  had  no  power  or  juris- 
diction regarding  future  conditions"  and  in  regard  to  a  sug 
gestion  that  the  Commission  could  construe,  interpret  and 
apply  the  law  by  preliminary  judgment  Commissioner  Walker 
said  "that  a  moment's  reflection  will  show  that  no  such  tri- 
bunal could  be  properly  created." 

Notwithstanding  this  position  taken  by  one  of  the  ab- 
lest members  of  the  Commission  and  supported  by  Com- 
missioner Cooley  who  even  went  so  far  as  to  say  the  Com- 
mission "could  not  suspend  the  long  and  short  haul  pro- 
vision of  the  law,  because  it  practically  would  require  the 
Commission  to  act  as  rate  makers  to  equalize  the  business 
situation,"  and  said  that  for  the  Commission  to  attempt 
that  work,  "it  would  be  impracticable",  the  present  Inter 
State  Commerce  Commission,  now  backed  up  by  the  balance 
of  the  Executive  Department  have  inducedfcongress  to  at- 
tempt this  impracticable  thing. 

The  President  in  his  message,  after  moralizing  to  a 
more  or  less  extent,  called  attention  to  the  great  corporate 
wealth  existing  and  said  in  his  message  to  congress: 
"it  is  a  matter  of  necessity  to  give  to  the  sovereign — that 


62  SOCIALISM  OR  EMPIRE. 

is  to  the  government  which  represents  the  people  as  a  whole 
— some  effective  power  of  supervision  over  their  corporate 
use." 

He  called  attention  to  the  fact  that  congress  is  author- 
ized to  regulate  commerce  between  states  and  says  that  if 
under  the  present  constitution  this  "power  to  regulate" 
does  not  allow  congress  to  do  the  thing  that  he  requests, 
an  amendment  should  be  made  to  meet  the  situation,  and 
plainly  suggested  that  congress  try  it  any  way,  and  see  how 
it  would  work;  and  then  made  the  startling  assertion  that 
"we  should  hereafter  carefully  undertake  and  resolutely 
persevere  "in  an  effort  to  "assert  the  sovereignty  of  the  na- 
tional government  by  affirmative  action." 

The  President  says  that  this  is  only  a  form  of  "innova- 
tion" and  says  it  has  been  recognized  by  law  making  bodies 
generally  "not  only  in  this  country  but  also  in  England 
before  and  since  this  country  became  a  separate  nation." 
This  sentence  can  be  read  two  ways— it  is  right  if  it  means 
that  England  and  Canada  have  recognized  affirmative  or 
initiative  action  in  the  Executive  Department,  but  if  it  means 
that  the  United  States  since  our  revolution  has  ever  recog- 
nized this  right  it  is  an  error,  or  it  only  has  been  because  the 
exception  was  too  trivial  to  bring  to  the  attention  of  the 
courts. 

That  is  the  difference  between  monarchy  and  freedom. 

He  says  it  has  been  a  misfortune  that  our  laws  have 
been  negative,  rather  than  affirmative,  and  that  it  is  time 
to  change. 

After  asserting  a  belief  that  all  great  accumulation  of 
wealth  should  be  regulated  and  controlled,  the  President 
said:  "The  first  thing  to  do  is  to  deal  with  the  great  corpora- 
tions engaged  in  the  business  of  interstate  transportation." 

He  recommended  "the  enactment  into  law  of  some 
scheme  to  secure  to  the  agents  of  the  government  such  su- 
pervision and  regulation  of  rates  charged  by  railroads  as 
shall  summarily  and  effectively  prevent  the  imposition  of 
unreasonable  or  unjust  rates"  and  he  called  upon  congress 
to  give  "an  affirmative  power  to  some  administrative  body" 
(meaning  the  Inter  State  Commerce  Commission.)  He 
said  that  "the  most  important  provision  which  such  law 
should  contain  is  that  of  conferring  on  some  competent  ad- 


POWERS  REQUESTED.  63 

ministrative  body  the  power  to  decide'  whether  rates  were 
reasonable  and  "to  prescribe  the  limit  of  rate  beyond  which 
it  shall  not  be  lawful  to  go" — this  decision  to  go  into  effect, 
and  to  obtain  thereafter  subject  to  review  by  the  courts. 

A  few  suggestions  were  made  by  him  as  to  how  the 
Commission  could  regulate  rates.  The  message  said:  "It 
sometimes  happens  at  present,  not  that  a  rate  is  too  high, 
but  that  a  favored  shipper  is  given  too  low  a  rate.  In  such 
a  case  the  Commission  would  have  the  right  to  fix  this  already 
established  minimum  rate  as  the  maximum."  and  said  this 
would  cure  railroad  companies  from  giving  low  rates. 

After  suggesting  heavy  fines  for  failure  to  obey  the 
Commissions'  order  and  that  they  be  given  power  to  deter- 
mine fair  competitive  rates  between  localities,  and  recom- 
mending that  all  kinds  of  freight  lines,  private  cars,  indus- 
trial spurs  etc.,  etc.,  be  turned  over  to  the  Inter  State  Com- 
merce Commission's  supervision,  the  President  took  four 
solid  columns  of  space  in  his  message  to  say  that  he  is  not 
an  imperialist  or  a  socialist,  but  that  he  advocates  their 
theory  of  government.  He  wants  the  very  foundation  of 
our  freedom  destroyed  if  he  believes  what  he  recommends 
the  congress  to  do.  He  recommends  a  revolution  in  our 
law  making  power  which  would  put  us  back  to  the  same 
position  we  were  in  before  our  separation  from  England, 
and  he  claims  it  is  done  through  the  will  of  the  "people." 
Of  course  the  congress  had  a  difficult  task  to  perform.  They 
knew  from  the  tone  of  the  message  that  it  was  doubtful  as  to 
whether  they  could  frame  a  bill  to  cover  the  ground,  and 
they  have  made  an  endeavor  to  "get  around  the  constitution" 
by  a  trick  of  legislation. 

The  attempt  is  shown  in  what  is  known  as  the  Hep- 
burn-Dolliver  bill  and  its  amendments. 

It  appears  that  the  Commission  is  to  see  to  it  that  trans- 
portation is  furnished  on  reasonable  request,  that  no  schedule 
shall  be  changed  without  thirty  days  notice  and  that  the 
Commission  have  power  to  fix  a  "just,  reasonable  and  fairly 
remunerative  rate  which  shall  be  the  maximum  rate." 

It  is  the  evident  intention  of  this  law  to  give  the  Inter 
State  Commerce  Commission  the  power  to  do  the  following 
wrongful  acts : 


64  SOCIALISM  OR  EMPIRE. 

First:  To  fix  a  rate  which  in  their  estimation  shall  be 
a  just  and  reasonable  rate,  which  shall  be  the  maximum  to 
be  charged. 

Second:  Through  an  initiative  power  to  adopt  any 
low  rate  given  by  a  railroad  company,  and  enforce  it 
as  a  maximum  rate  to  prevent  railroads  from  giving  low 
rates. 

Third :  To  order  that  no  change  in  tariff  can  be  made 
by  the  railroads  or  the  Commission  without  thirty  days  notice. 

Fourth:  To  oblige  railroads  to  furnish  cars  to  all 
shippers  alike,  on  reasonable  notice. 

Fifth:  To  investigate  books  and  papers  of  railroad 
companies  to  enable  them  to  decide  what  a  reasonable  rate 
would  be. 

(In  this  it  was  the  evident  intention  of  the  President 
that  so-called  "watered"  stock  should  not  be  considered 
in  the  computation.) 

Sixth:  To  supervise  the  private  car  lines,  regulate 
iceing  charges  on  refrigerator  lines,  and  by  investi- 
gation of  books  and  papers  see  that  these  companies  do  not 
make  more  than  a  fair  interest  on  their  investment  in  good 
years,  and  stand  the  losses  of  poor  years  out  of  their  own 
pockets. 

Seventh:  To  see  that  no  one  locality  is  treated  better 
in  rates  or  accommodations  than  another. 

Eighth:  To  suspend  the  long  and  short  haul  provis- 
ion of  the  law  of  congress  in  regard  to  that  feature  of 
rate  regulation. 

Ninth:     To   prevent   issuance   of   passes   except  for    cer- 
tain   purposes. 

Congress  had  already  passed  laws  making  it  an  offence 
to  charge  more  for  a  short  haul  than  for  a  long  one,  and  also 
provided  stringent  laws  regarding  rebates.  As  the  consti- 
tution authorizes  it  to  pass  definite  laws  regulating  Inter 
State  Commerce,  this  is  within  its  province,  but  it  is  ques- 
tionable if  even  these  provisions  are  a  benefit  to  the  country, 
as  I  will  show  further  along. 

The  provisions  I  have  mentioned  are  not  only  uncon- 
stitutional in  attempting  to  place  in  the  hands  of  a  Commis- 
sion initiative  power  not  placed  in  the  Congress  itself,  but 
are  against  public  policy  and  will  strike  a  staggering  blow 
to  our  future  prosperity. 


POWERS  REQUESTED.  65 

I  do  not  believe  that  any  fair  minded  business  man 
after  reading  these  nine  provisions,  can  fail  to  say  that  this 
action  puts  the  greater  part  of  the  financial  management 
of  our  railroad  system  into  the  hands  of  the  Executive  Depart- 
ment. 

I  am  willing  to  acknowledge  that  this  power  is  granted 
a  Commission  in  Canada  and  England,  and  that  the  Emperor 
of  Germany  and  Czar  of  Russia  run  the  railroads  as  a  gov- 
ernment adjunct,  but  I  will  show  that  not  one  of  these  coun- 
tries are  as  successfully  served  as  we  are,  and  I  hope  I  have 
shown  already  that  it  was  not  the  intent  of  the  founders 
of  our  government  that  we  should  do  these  things. 

The  fact  is  there  are  no  business  reasons  for  the  change 
demanded;  both  of  them  are  political. 

First:  The  executive  department  of  the  United  States 
wants  to  be  able  to  dictate  to  the  great  railroad  interests  of 
the  country  and  oblige  them  to  become  subservient  to  the 
executive  will. 

Second:  This  whole  talk  of  the  move  being  so  press- 
ing, is  but  playing  to  the  grand  stand  filled  with  agitators, 
cranks  and  socialists  who  appear  to  occupy  the  stage  for 
the  brief  moment. 

The  class  of  our  citizens  which  delights  in  decrying  every 
success ;  which  would  like  to  tear  down  the  work  of  others  and 
desire  government  to  in  some  way  stop  abler  men  from  reap- 
ing benefits  greater  than  the  most  ordinary,  has  caught 
the  ear  of  our  impulsive  President,  and  he  mistakes  this  so- 
cialistic clap  trap  for  the  voice  of  the  people." 

Go  slow!  This  rage  for  "public  control"  "public  in- 
vestigation", "busting  trusts"  and  a  general  desire  on  the 
part  of  idle  babblers  and  weak  politicians  to  attend  to  every 
body  elses  business,  will  wear  away  the  same  as  the  Green- 
back, the  Farmers'  Alliance,  Populism  and  many  other 
political  vagaries  of  the  past. 

While  the  excitement  is  new,  and  the  man  who  advances 
the  most  startling  things  in  the  way  of  "reform"  stands  in 
the  "lime  light";  by  1908  a  politician  who  would  advocate 
seriously  that  laws  should  be  passed  under  the  name  of  "re- 
form" that  would  change  the  intent  of  our  constitution, 
nullify  the  past  expressions  of  our  courts,  alter  the  powers 
of  our  congress  and  create  a  semi-dictatorship  within  our 


66  SOCIALISM  OR  EMPIRE. 

executive  department;  would  be  laughed  at  the  same  as 
the  populist  orators  (who  were  just  as  honest  in  their  con- 
victions) were  a  few  years  ago.  But  in  each  one  of  the  nine 
"reforms"  advocated  by  this  legislation  there  is  positive 
danger  to  our  business  prosperity. 

I  shall  endeavor  to  make  plain  some  of  the  dangers  to 
different  sections  of  our  country,  and  possible  loss  to  the 
public,  if  these  powers  are  confirmed  by  the  courts  and  show 
why  most  of  the  changes  demanded  are  "impracticable." 

It  certainly  will  unsettle  business  affairs  in  a  good  por- 
tion of  our  country,  and  probably  injure  the  public  much 
more  than  the  railroads. 


SOME  COMPARISONS.  67 


CHAPTER  IX. 

SOME  COMPARISONS. 

From  the  language  used  in  the  President's  Message, 
one  would  gather  the  idea  that  some  great  wrong  was  being 
perpetrated  on  the  American  people  by  the  railroads  of  the 
country.  That  immediate  action  must  be  taken  or  the 
"people"  would  be  robbed,  and  possibly  communities  ruined 
by  grasping  corporations. 

While  the  President  did  not  use  the  language  of  the 
blatant  socialistic  speakers  on  the  street  corners,  his  mes- 
sage clearly  reflects  their  views  and  his  recommendations 
receive  their  applause.  All  over  the  country  these  agita- 
tors now  claim  that  the  Republican  President  acknowledges 
their  charges  to  be  right,  and  adopts  part  of  their  theory 
of  government  as  a  corrective  for  the  evil. 

The  cause  of  socialism  has  received  its  greatest  assist- 
ance through  the  action  of  a  Republican  President.  Now 
let  us  go  carefully  over  the  transportation  systems  in  vogue 
in  this  country  and  in  others.  We  will  compare  them  and 
get  at  results.  Let  us  see  if  the  charges  made  by  Bryan, 
Debbs,  Tillman  and  LaFollette  and  which  was  evidently 
accepted  as  true  by  the  President,  really  are  facts. 

If  the  railroad  owners  of  the  United  States  are  taking 
an  unfair  advantage  it  should  be  known  and  exposed  fully. 

If  they  are  doing  a  good  service  it  should  also  be  under- 
stood and  credit  given  them. 

If  the  regulative  control  or  ownership  of  railroads  by 
government,  is  an  improvement  on  our  system,  let  us  recom- 
mend it,  but  if  it  is  demonstrated  to  be  worse  in  practice 
than  where  private  parties  own  and  control  them,  it  would 
be  foolish  to  change. 

There  are  a  few  facts,  not  generally  understood  by  the 
American,  people  which  are  of  interest,  in  discussing  this 
transportation  problem. 


68  SOCIALISM  OR  EMPIRE. 

I  will  make  a  few  comparisons  and  while  they  may  be 
surprising  they  are  conservatively  stated. 

For  instance:  over  forty  per  cent,  of  all  the  railroads 
in  the  world  are  in  the  United  States. 

No  other  single  nation  has  over  one-seventh  as  many 
miles  of  railroad  as  we  have  in  this  country. 

There  are  single  systems  of  railroad  in  the  United  States 
which  carry  more  freight  than  the  whole  traffic  amounts 
to  in  many  of  the  European  nations. 

The  transportation  problem  is  more  scientifically  handled 
in  this  country  than  in  any  other. 

We  pay  a  far  lower  rate  of  freight  than  is  charged  in 
any  other  country  and  our  people  as  a  whole  receive  more 
benefit  from  railroad  transportation  than  any  other. 

In  1904  (the  latest  figures  at  hand)  the  folloing  rates 
per  ton  per  mile  prevailed  in  the  various  countries  having 
a  fair  amount  of  traffic: 

The  United  States o .  76  cents 

The  United  Kingdom 2  . 47  cents 

The  French  Republic i .  33  cents 

The  German  Empire.  1.25  cents 

The  Austrian  Empire 1.25  cents 

The  Kingdom  of  Italy. i .  60  cents 

The  Kingdom  of  Sweden i .  70  cents 

European  Russia °  •  99  cents 

Australia 2  . 08  cents 

India 0.85  cents 

Japan i .  03  cents 

In  the  succeeding  chapters  explaining  the  operation  of  railroads  in  Europe,  Russia 
and  India,  details  will  be  giren  and  the  reasons  for  the  exceptional  charges  in  those 
countries  will  be  shown. 

At  this  point  I  wish  to  make  it  plain  that  the  railroads 
of  the  United  States  charge  about  one  half  what  is  charged 
in  other  nations.  The  next  thing  I  wish  to  impress  upon 
the  mind  of  the  reader  is  the  fact  that  the  1,500,000  em- 
ployees of  our  railroad  systems  (there  were  1,312,537  in  1903) 
receive  from  two  to  three  times  the  salary  per  man,  which 
is  paid  in  any  European  country. 

A  comparison  of  wages  paid  by  the  English  rail- 
roads, where  labor  unions  and  lack  of  government  owner- 


SOME  COMPARISONS.  69 

ship  have  allowed  the  highest  wages  in  Europe  to  be  paid, 
with  those  in  the  United  States  would  be  as  follows,  per  day : 

Engineers United  States     $4.16,      England  ....$1.50 

Firemen "  2  . 39,                      i .  02 

Conductors "  "  3-54,                      J  •  20 

Trainmen "  2.31,                      96 

Machinists "  "  2.61,            "         1.16 

Shopmen 1.92,                      84 

Section  Foremen.  .  "  i .  79,            "         i  .38 

Other  Trackmen ..  "  "  1.32,            "        74 

Laborers u  "  i . 84,            "        72 

The  average  wage  paid  railroad  men  in  England  amounts 
to  $244.  per  year,  while  in  the  United  States  the  average 
is  $643  and  the  English  railroad  man  receives  the  highest 
pay  in  Europe.  These  two  facts  show  how  successfully  our 
railroads  have  been  managed.  When  it  is  known  that 
64  per  cent,  of  the  expenses  of  operation  are  wages 
and  salaries  paid,  it  causes  students  of  political  economy 
to  almost  question  the  figures. 

There  are  other  physical  features  which  further  com- 
plicate the  comparison. 

The  English  roads  through  superior  construction  and 
the  elimination  of  grades  have  cost  over  five  times  as  much 
per  mile  as  the  average  in  the  United  States,  but  with  this 
vast  expenditure  it  costs  these  roads  nearly  twice  as  much 
to  haul  freight  as  the  American  roads  charge  their  customers. 

There  is  not  a  government  owned  railroad  in  the  world 
but  which  pays  out  for  operation  as  much  as  the  average 
charge  collected  in  this  country. 

This  anomaly  in  the  conduct  of  business  can  only  be 
accounted  for  by  crediting  our  railroad  managers  with  su- 
perior ability  in  working  out  vast  transportation  problems. 
The  fierce  rivalry  between  our  railroads  have  driven  them 
to  a  complete  change  of  equipment  in  the  last  few  years. 

The  result  has  been  great  improvement  in  this  country, 
while  the  roads  of  Europe  have  merely  held  their  own. 

European  passenger  equipment  has  improved  to  some 
extent,  but  nearly  all  of  their  improvement  has  been  in  adopt- 
ing American  methods  because  of  shame  brought  to  their 
railroad  officials  through  comparisons  made  by  travelers. 

In  handling  freight   (the  true  business  of   a  railroad) 


70  SOCIALISM  OR  EMPIRE. 

our  transportation  companies  by  increasing  the  weight  of 
motive  power  and  capacity  of  cars,  have  increased  our  train 
tonnage  average  to  332  tons  per  train  in  the  United  States; 
(the  Pennsylvania  Railroad  system  averages  540  tons)  while 
in  England  the  average  varies  from  46  to  78,  and  in  Europe 
from  51  to  69  tons  per  train. 

Nearly  all  of  the  freight  cars  in  the  United  Kingdom 
and  Europe  are  still  of  the  ten  ton  or  less  capacity,  while  we 
are  gradually  introducing  fifty  ton  cars  for  heavy  traffic, 
and  the  average  at  present  on  our  larger  freight  systems  is 
nearly  twenty-five  tons  per  car.  The  rates  in  those  coun- 
tries being  regulated  by  law,  their  service  controlled  by  gov- 
ernment, and  the  incentive  brought  on  by  competition  elim- 
inated, it  is  but  natural  that  the  roads  of  Europe  should  not 
improve.  There  is  no  use  to  protest  on  the  part  of  the  pub- 
lic in  European  countries,  because  the  roads  merely  comply 
with  the  orders  of  the  government,  or  the  commissions  or 
Boards  of  Trade,  and  the  progressive  business  man  who 
desires  to  build  up  some  new  industry  which  would 
require  an  innovation  on  the  part  of  the  railroad  people, 
is  tired  out  trying  to  find  out  where  the  power  lies 
that  could  assist  him,  and  soon  moves  to  the  United  States 
with  his  new  idea. 

In  any  country  where  railroad  transportation  is  con- 
trolled and  regulated  by  the  government,  the  "initiative" 
force  which  improves  methods  and  conditions  and  the  in- 
centive to  attempt  new  and  untried  experiments  are  eliminated. 

There  is  no  way  of  government  regulation  which  does 
not  to  a  certain  extent  positively  prevent  competition. 

Through  this  non-intervention  of  government  control 
great  minds  have  developed  a  system  of  transportation  in 
the  United  States  which  surpasses  all  the  rest  of  the  world, 
and  is  an  effective  adjunct  to  our  business  success.  It  is 
true  that  in  this  arrangement  some  localities  have  been  fav- 
ored and  some  have  not  received  due  consideration,  but 
at  the  same  time  it  is  very  true  that  the  railroads  have  as- 
sisted more  than  any  other  single  factor  in  the  development 
of  a  great  part  of  our  country. 

They  were  not  built  on  the  theory  that  this  or  that 
locality  had  "rights"  to  service;  but  as  business  ventures, 
either  to  take  part  of  a  competitive  business  from  a  rival 
road,  to  open  up  and  assist  in  the  development  of  new  ter- 


SOME  COMPARISONS.  71 

ritory,  or  draw  trade  to  certain  cities  or  ports  in  which  the 
constructors  of  the   railroad   were   interested   more   or  less. 

Having  attained  the  first  rank  in  transportation  mat- 
ters on  land,  and  having  shown  the  world  that  we  can  make 
money  by  carrying  freight  at  from  one-half  to  one-third 
the  cost  in  other  countries,  and  at  the  same  time  pay  from 
two  to  three  times  as  much  wages  as  they  do;  why  should 
we  want  to  change  to  the  methods  of  the  very  countries  we 
have  eclipsed? 

The  man  who  calls  attention  to  the  fact  that  England, 
Germany  and  Russia  control  their  railroads  with  a  compre- 
hensive, initiative  control,  should  investigate  their  ways 
and  see  if  it  would  benefit  the  United  States  to  have  the  gov- 
ernment interfere  and  assume  any  kind  of  control  of  our  rail- 
roads, which  could  not  be  expressed  in  a  definite  negative 
law. 

If  an  "initiative"  power  be  granted  our  executive  de- 
partment through  the  Inter  State  Commerce  Commission, 
it  means  an  unsettling  influence  on  business  in  many  sections 
of  the  country  for  several  years,  and  will  result  in  the  end 
of  all  competition  both  for  traffic  or  in  the  way  of  improved 
service. 

It  is  this  government  control  of  business  ventures  in 
other  countries  which  has  enabled  the  United  States  to  be- 
come the  first  business  nation  on  earth. 

For  the  purpose  of  competition  our  transportation  men 
have  built  up  lines  of  traffic  (some  of  them  entirely  artificial) 
which  have  enabled  this  wonderful  development  in  trans- 
portation to  successfully  and  profitably  meet  a  situation 
that  would  ruin  any  government  owned  railroad  in  the  world. 

I  do  not  think  the  time  has  arrived  or  that  it  will  ever 
come  when  "we  should  carefully  undertake  and  resolutely 
persevere  in  an  effort  to  assert  the  sovereignty  of  the  national 
government  by  affirmative  action"  especially  when  an  effort 
is  made  to  assert  affirmative  control  of  private  citizens  pro- 
perty. 

I  suppose  that  the  "reformers"  who  now  see  that  we 
have  the  best  railroad  system  in  the  world,  carrying  freight 
cheaper  and  paying  better  wages  to  laboring  men  than  any 
other  country,  with  the  usual  blindness  of  reformers,  desire  to 
"change  all  of  this." 

Do    the   people    want    it? 


72  SOCIALISM  OR  EMPIRE. 


CHAPTER  X. 

VOLUME  OF  TRAFFIC. 

Transportation  managers  in  the  United  States  were 
the  first  to  grasp  the  fact,  that  "volume  of  traffic"  was  the 
most  important  factor  in  cheap  transportation. 

In  the  construction  of  our  railroad  systems  nearly  all 
the  great  trunk  lines  were  built  with  the  object  in  view  of 
drawing  trade  to  certain  distributing  points  from  certain 
other  distributing  points,  and  later  in  several  instances  where 
a  natural  point  did  not  exist  a  city  has  been  brought  into 
existence  through  their  exertion. 

The  influences  which  created  these  "constructive" 
railroad  centers,  which  on  their  face  would  appear  to  be  only 
an  example  of  the  rankest  favoritism,  and  an  injustice  to  neigh- 
boring localities;  were  in  fact  a  business  problem  necessary 
to  attain  the  ends  of  competitive  activity  which  would  give 
the  railroads  the  line  of  freight  sufficient  to  create  the  neces- 
sary volume  of  traffic. 

By  moving  great  quantities  of  freight  along  certian  routes, 
the  price  of  transportation  per  unit  has  been  so  materially 
reduced  as  to  revolutionize  the  business  of  the  country, 
and  this  is  the  reason  our  railroads  are  able  to  do  the  things 
shown  in  the  previous  chapter,  and  still  make  money. 

Los  Angeles,  California,  is  one  of  the  remarkable  ex- 
amples of  a  constructive  railroad  center.  Here  is  a  city 
twenty  miles  from  the  Ocean,  whose  citizens  look  with  dis- 
dain on  the  seaports  of  Southern  California;  but  who  by 
a  great  strain  of  the  imagination  are  given  rates  to  compete 
with  some  mythical  water  competition  and  the  result  has 
been  a  phenomenal  city.  El  Paso,  Salt  Lake,  Denver  and 
Pueblo  are  other  instances.  While  Kansas  City  at  one  time 
had  a  seamboat  line  to  St.  Louis  it  has  been  the  railroads 
which  have  built  up  a  commercial  city,  at  the  mouth  of  the 


VOLUME  OF  TRAFFIC.  73 

Kaw,  and  Omaha  is  the  direct  result  of  railroad  construction. 
St.  Joseph  had  the  great  trade  of  the  Missouri  River  country 
when  the  river  was  a  factor  in  transportaton,  but  that  point 
and  Leavenworth  thought  so  much  of  their  "natural"  posi- 
tion that  they  threw  away  all  chance  for  future  greatness, 
because  they  thought  the  roads  would  have  to  come  their 
way.  Instead  of  doing  so,  they  built  to  Omaha  and  Kansas 
City,  so  that  these  two  latter  cities  are  but  examples  of  con- 
structive railroad  centers.  Minneapolis  and  St.  Paul  are 
in  the  same  class,  and  the  city  of  Cleveland  really  owes  her 
great  prominence  as  a  business  center  to  railroad  competitive 
influences. 

The  transportation  problem  that  has  been  worked  out 
in  the  United  States  more  perfectly  than  in  any  other  coun- 
try, is  the  one  of  cheap  cost  per  unit  through  creation  of 
volume  of  traffic  along  certain  routes. 

No  "reasonable"  rate  of  freight  could  be  made  on  a 
business  between  Los  Angeles  and  Chicago  based  on  hand- 
ling one  car  per  day,  but  by  building  up  the  trade  from  Los 
Angeles  and  vicinity,  so  that  several  hundred  cars  are  shipped 
daily  in  both  directions,  a  rate  is  made  and  profit  derived 
therefrom,  which  is  fifty  times  lower  than  a  rate  which  would 
lose  money,  if  but  a  single  car  was  moved. 

The  railroad  centers  are  not  favored  because  of  antagon- 
ism to  other  towns  on  the  part  of  the  transportation  lines, 
but  favored  because  of  this  necessity  of  creating  the  volume 
of  traffic  in  definite  directions.  The  idea  has  been  that  by 
making  favorable  rates  several  hundred  cars  per  day  can  be 
transported  from  one  definite  locality  to  another  and  be 
depended  upon  as  a  regular  business. 

It  enables  the  managers  of  transportation  lines  to  figure 
out  expenses,  equipment  and  supplies  with  a  definite  surety 
that  they  will  be  needed.  It  is  the  prime  cause  of  our  econ- 
omical handling  of  traffic.  Many  of  these  constructive 
centers  have  assisted  railroads  by  advancing  money,  and 
Cincinnati  today  is  heavily  interested  in  a  railroad  which 
was  constructed  with  a  view  of  drawing  southern  trade  to 
that  city. 

Hundreds  of  cities  in  the  United  States  have  given 
money  to  aid  in  construction  of  roads  which  were  expected 


74  SOCIALISM  OR  EMPIRE. 

to  favor  their  localities  in  making  rates,  and  several  instances 
are  known  where  cities  nearly  impoverished  themselves 
trying  to  outstrip  others. 

Baltimore  made  great  efforts  to  build  up  a  competitive 
center  at  that  point  and  strained  her  credit  assisting 
in  the  construction  of  railroads,  but  after  finding  that  a  dif- 
ferential tariff  favoring  that  port,  and  every  other  possible 
inducement,  could  not  change  the  laws  of  commerce,  she 
sold  out  her  road  and  it  now  has  terminals  in  New  York 
and  joins  in  the  competitive  trade  enjoyed  by  trasportation 
companies  there. 

In  this  effort  on  the  part  of  Baltimore  I  assisted  and 
shipped  on  an  average  one  hundred  cars  of  freight  a  day  for 
months,  but  the  lack  of  return  freight  presented  obstacles 
that  could  not  be  overcome  by  the  railroads,  and  the  export 
business  of  Baltimore  hardly  can  at  any  time  be  expected 
to  exceed  her  ability  to  create  return  traffic. 

Through  a  wise  arrangement  of  tariff  and  fostering  of 
trade  on  the  part  of  the  railroads,  the  city  of  Pittsburg 
produces  more  railroad  traffic  than  any  other  in  the  world 
and  while  the  river  trade  started  the  city,  it  has  been  years 
since  the  railroads  have  considered  river  competition  as  any 
factor  in  establishing  rates. 

The  Connellsville  Coke  district  has  been  assisted  through 
competition  and  favorable  rates  so  that  it  is  a  dull  day  when 
less  than  thirteen  hundred  cars  of  coke  are  shipped  from 
that  busy  mart. 

The  effort  to  create  volume  of  traffic  as  part  of  the 
rate  making  problem  is  all  within  the  last  forty  years. 

Prior  to  1868  the  Lake  Shore  R.  R.  or  the  three  inte- 
grant parts  of  that  road  between  Toledo  and  Buffalo  cut 
down  their  force  on  the  opening  of  navigation;  running  east 
ward  only  live  stock  trains  and  the  limited  high  class  freight 
offered,  and  carrying  goods  westward,  but  not  attempting  to 
compete  with  water  transportation  on  heavy  or  low  class 
traffic;  and  while  the  tariff  charged  was  four  times  as  much 
as  today,  the  roads  did  not  pay  much  profit. 

In  the  spring  of  1868,  however,  the  traffic  manager 
gave  authority  to  enter  into  contracts  for  freight  with  a 
limit  of  one  cent  a  ton  a  mile,  if  the  shipper  agreed  to  not 
only  give  the  road  his  business  in  the  Spring,  but  continue 
on  through  the  Summer. 


VOLUME  OF  TRAFFIC.  75 

I  was  the  active  head  of  operation  at  Toledo  (the  west- 
ern end  of  the  road  at  that  time)  and  through  the  necessity 
of  "swiping"  cars  of  connecting  roads  and  rushing  the  light 
equipment  then  in  use,  I  passed  a  year  of  truly  strenuous 
existence,  and  it  was  found  that  more  money  was  made  by 
the  large  volume  carried  at  low  prices  than  had  been  made 
before. 

This  road  now  charges  only  an  average  of  £  cent  per 
ton  per  mile  and  makes  money,  and  it  is  only  through  the 
vast  amount  of  traffic  passing  over  its  rails  in  set  routes  each 
day  that  this  is  done.  Now  there  is  no  use  on  the  part  of 
Railroad  men  to  deny  that  the  vast  accumulation  of  traffic 
over  part  of  their  lines  has  to  be  assisted  by  the  rate  making 
power  in  their  hands,  and  I  think  it  better  to  show  plainly 
that  this  power  assists  the  whole  people  more  than  it  would 
to  have  the  government  interfere.  If  it  is  a  fact  that  the 
volume  of  traffic  is  a  prime  factor  in  creation  of  low  rates, 
it  is  a  truth  that  the  only  way  to  drift  traffic  over  the  favor- 
able section  of  road  is  to  modify  and  alter  tariffs  to  suit 
varying  conditions. 

Any  hard  and  fast  rule  would  not  bring  disaster  ac- 
cording to  my  way  of  thinking,  but  it  would  oblige  advances 
in  those  favorable  tariffs,  and  possibly  dissipate  the  volume 
of  traffic  to  such  an  extent  as  to  disturb  every  business  ven- 
ture connected  with  the  transportation  problem. 

Suppose  that  a  law  is  passed  granting  every  power 
demanded  by  the  executive  department,  and  only  those  de- 
manded; let  us  work  them  out  in  a  business  way.  Keep  in 
mind  that  in  England  after  thirteen  years  investigation  and 
study  (under  a  monarchy  which  allows  the  Board  of  Trade 
to  ask  and  receive  about  any  kind  of  law  it  wants  regard- 
ing transportation)  the  Board  of  Trade  on  attempting  to 
put  the  new  law  in  force,  found  that  it  was  necessary  to  make 
thirty-five  exceptional  orders  in  less  than  one  year. 

It  can  be  seen  that  there  is  a  form  of  discrimination  in 
making  rates,  one  locality  receiving  better  treatment  than 
another,  and  that  this  is  made  for  the  purpose  of  enabling 
roads  to  swing  enough  traffic  on  certain  lines  to  allow  them 
to  make  cheap  rates  for  all. 

The  President  recommended  that  a  law  be  passed  giving 


76  SOCIALISM  OR  EMPIRE. 

the  Inter  State  Commerce  Commission  power  to  consider 
these  matters  and  correct  any  favoritism  of  this  character 
and  the  attempt  has  been  made. 

Any  power  granted  by  congress  will  necessarily  have 
to  be  tied  down  to  a  hard  and  fast  rule  of  some  kind  because 
congress  itself  is  deprived  of  any  discretionary  power  through 
the  provision  in  the  constitution  which  says,  that:  "no  pre- 
ference shall  be  given  by  any  regulation  of  commerce  or  rev- 
enue to  the  ports  of  one  state  over  those  of  another." 

The  government  either  by  act  of  congress  or  a  power 
granted  the  executive  department,  will  necessarily  be  obliged 
to  obey  this  plain  provision,  and  the  result  will  be  the  destruc- 
tion of  all  "differentials"  now  made  by  the  railroad  com- 
panies between  localities,  and  it  is  hard  to  see  how  any 
other  than  a  definite  mileage  can  be  considered  by  a  govern- 
ment board. 

The  principal  tool  used  by  the  Inter  State  Commerce 
Commission  in  this  agitation  was  a  Milwaukee  man,  who 
has  had  a  dream  that  his  town  should  equal  the  city  of  Chi- 
cago, and  be  favored  the  same  as  Chicago  has  been  by  the  rate 
making  powers. 

A  government  board  of  any  kind  will  of  necessity  be 
obliged  to  order  that  Milwaukee  be  given  the  same  favors 
as  Chicago,  and  it  would  also  be  obliged  to  give  Kenosha 
the  same  favors  as  Milwaukee. 

Peoria,  Joliet,  Rockford  and  Aurora  could  claim  even 
more  favorable  rates  than  Chicago,  and  the  Inter  State  Com- 
merce Commission  would  be  obliged  to  grant  them,  and 
the  rivalry  of  one  locality  against  another  would  in  a  short 
time  dissipate  the  "volume  of  traffic"  and  result  in  all  being 
obliged  to  pay  higher  tariffs. 

By  the  government  taking  hold  of  the  supervision  of 
rates,  the  constructive  railroad  centers  now  so  important 
a  factor  in  our  cheap  transportation,  will  be  able  only  to 
take  advantage  of  any  geographical  position  they  may 
have,  and  in  many  cases  it  will  destroy  the  wholesale  trade 
built  up  at  those  points.  Australia  furnishes  a  marked 
example. 

Under  private  control  the  traffic  system  has  been  built  up 
in  the  way  I  have  described,  and  with  the  government  at- 


VOLUME  OF  TRAFFIC.  77 

tending  to  its  own  business  it  will  grow  more  perfect;  but 
there  is  no  way  for  any  initiative  control  of  such  a  matter 
by  a  government  commission,  but  which  would  either  bring 
disaster  to  the  railroads  or  increase  cost  to  the  people.  Mr. 
Sibley  in  his  speech  before  congress  on  this  subject  said 
that  this  attempt  to  interfere  with  the  rate  making  power 
by  the  government  is  "the  opening  of  Pandora's  box,  the 
sowing  of  dragons  teeth,  the  array al  of  section  against  sec- 
tion, state  against  state,  city  against  city,  town  against 
town  and  in  place  of  a  people  cemented  and  bound  together 
by  ties  through  the  close  exchange  of  property  we  will  have 
rankling  festers  in  all  portions  of  the  body  politic." 
Mr.  Sibley  was  right. 


78  SOCIALISM  OR  EMPIRE. 


CHAPTER  XI. 

PARTIAL  ELIMINATION  OF  DISTANCE. 

In  the  preceding  chapter  I  have  called  attention  to 
the  necessity  of  concentrating  a  volume  of  traffic  between 
definite  points  to  succeed  in  giving  cheap  transportation. 

While  the  Executive  recommended  that  the  Inter  State 
Commerce  Commission  be  given  power  to  equalize  these 
differences  on  complaint  of  any  certain  locality  and  the  law 
passed  attempts  to  comply  therewith  I  do  not  believe  our 
courts  will  sustain  the  position. 

It  would  deprive  many  of  the  owners  of  railroad  proper- 
ties of  the  very  purpose  for  which  their  money  had  been 
invested.  The  towns  whose  money  went  into  railroads 
would  be  obliged  to  allow  their  venture  to  give  some  rival 
as  good  service  as  they  received  themselves  and  at  as  favor- 
able rates.  There  are  many  features  in  such  a  movement 
that  would  prove  unjust  to  railroad  property  owners  and  so 
interfere  with  the  intent  of  the  investors,  as  to  take  away 
from  them  the  right  of  control  of  their  own  property. 

The  roads  which  were  constructed  for  Chicago  trade 
would  be  obliged  to  divert  their  traffic  and  divide  it  up  with 
other  points  not  intended  by  the  owners  at  all. 

It  is  so  evident  that  this  would  be  a  partial  "seizure" 
of  private  property  and  an  encroachment  on  the  "immuni- 
ties" of  citizens  of  the  United  States,  as  to  be  "imprac- 
ticable" as  Judge  Cooley  has  said  and  it  would  not  be  de- 
sired by  the  people,  because  it  could  only  in  the  end  result 
in  raising  the  rate  to  Chicago,  so  as  to  equalize  loss  of  revenue 
on  the  part  of  the  railroads. 

The  power  of  a  government  board,  or  the  government 
to  equalize  or  adjust  traffic  between  localities  is  so  limited 
by  fundamental  law  that  it  could  only  be  arranged  through 
a  .mileage  determination  and  this  would  prove  disadvan- 
tageous to  the  whole  business  operations  of  the  country. 


ELIMINATION  OF  DISTANCE.  79 

The  arrangements  of  tariff  in  the  United  States  have 
about  eliminated  distance  as  a  basis  of  calculation  and  the 
question  as  to  how  many  cars  of  freight  can  be  obtained, 
if  such  and  such  a  rate  is  made,  is  more  important  than  wheth- 
er it  is  fifty,  one  hundred  or  two  hundred  and  fifty  miles 
shorter  haul. 

Following  in  our  footsteps  Russia  has  attempted  to 
demonstrate  that  a  rule  can  be  observed  in  such  method. 
In  the  movement  of  Siberian  wheat  to  Reval  on  the  Baltic 
the  government  rate  from  Omsk,  2,400  miles,  is  .408  cents 
per  ton  per  mile,  while  from  a  point  2,790  miles  away  the 
rate  is  .351  and  from  3,265  miles  but  .30  cents  per  ton  per 
mile  and  it  costs  the  latter  sum  to  transport  the  grain,  pay- 
ing no  tax  to  the  government  or  interest  on  investment. 
If  they  could  build  up  a  traffic  of  two  thousand  cars  per  day 
and  a  return  trade  of  some  kind,  the  rates  they  are  attempting 
would  pay,  but  as  it  is,  each  year  the  government  pays  money 
out  of  the  public  treasury  to  support  the  railway  system. 

Our  American  railroad  men  in  constructing  their  vol- 
ume of  traffic  have  not  confined  themselves  to  hard  and 
fast  rules  in  securing  business.  If  an  industry  at  some  point 
on  their  line  could  be  developed  through  a  lower  rate,  with 
a  tonnage  sufficient  to  make  it  an  object  to  the  railroad, 
especial  favors  were  given,  in  the  hope  of  bringing  popula- 
tion and  wealth  to  localities  served  by  the  Company. 

In  most  of  these  instances  the  railroad  has  made  low 
rates  on  freight  moving  adverse  to  their  larger  tonnage 
with  the  purpose  of  filling  empty  cars,  and  the  rate 
would  not  be  given  in  case  the  increased  traffic  only 
increased  their  tonnage  in  the  same  direction  in  which  the 
majority  was  already  moving.  • 

It  will  be  found  on  investigation  that  nearly  all  of  the 
"discrimination"  complained  of  on  the  part  of  some  of  our 
shippers  is  through  this  business  proposition  put  up  to  rail- 
road managers. 

The  law  now  prevents  them  from  making  personal  or 
private  discrimination  of  this  character,  and  they  are  ob- 
liged to  make  the  rate  a  locality  rate  open  to  all.  It  would 
be  better  to  have  a  special  rate  allowed  in  such  cases  with 
the  shipper  agreeing  to  furnish  a  certain  tonnage  per  mcnth 
than  to  make  the  locality  rate. 


80  SOCIALISM  OR  EMPIRE. 

This  is  done  in  England  and  Germany  and  in  fact  nearly 
every  country  where  the  government  controls  or  regulates 
rates.  In  some  cases  the  principal  business  of  a  railroad 
system  is  a  "forced"  trade  of  this  character.  The  Northern 
Pacific  and  Great  Northern  Railroads  through  an  arrange- 
ment of  tariff  carry  the  lumber  of  Oregon  eastward  and 
distribute  it  to  all  of  the  great  central  west,  and  in  return 
take  the  flour  of  the  twin  cities  of  Minnesota  (and  I  have 
seen  the  time  when  the  wheat  of  northern  Texas  has  been 
sent  to  Minneapolis  and  ground  into  flour  to  fill  the  trade) 
right  through  the  wheat  fields  of  Washington  and  Oregon 
and  on  to  the  open  ports  of  China  and  Japan. 

I  was  present  when  the  President  of  that  system  of 
roads  assured  the  people  of  St.  Paul  and  Minneapolis  that 
if  they  would  go  over  to  the  Orient  and  work  up  this  trade, 
he  would  see  that  it  did  not  cost  over  50  cents  per  TOO 
pounds  to  make  delivery  at  these  ports,  over  one-third  the 
way  around  the  world. 

For  the  purpose  of  creating  volume  of  traffic  across  Iowa 
and  Illinois  to  Chicago,  the  connecting  roads  west  of  the 
Missouri  river  are  given  a  constructive  mileage  of  40  per 
cent,  greater  than  they  really  have,  to  reimburse  them, 
first:  for  the  origination  of  the  business,  and  second:  because 
they  necessarily  have  not  the  density  of  traffic  which  would 
enable  them  to  profitably  engage  in  carrying  freight  as  cheap- 
ly as  "trunk  line"  systems  could  do. 

This  constructive  mileage  is  even  allowed  the  western 
portion  of  systems  of  road  belonging  to  the  same  company, 
because  it  is  recognized  that  any  other  system  of  book-keep- 
ing would  show  the  greater  portions  of  the  operated  system 
as  non-producers  of  dividends  and  have  a  depressing  effect 
on  the  value  of  securities. 

The  apparent  discrimination  of  the  Milwaukee  and  St. 
Paul  and  the  Northwestern  Railways  against  Wisconsin,  which 
has  brought  forward  one  of  the  most  aggressive  and  reck- 
less agitators  for  rate  control  by  the  government,  is  through 
this  very  feature  of  volume  of  traffic  controlling  profitable 
railroad  operation. 

The  comparison  is  continually  made  by  Wisconsin  men 
with  what  is  done  in  Iowa.  Look  at  the  map  and  you  will 
see  that  these  two  roads  partake  of  the  transcontinental 


ELIMINATION  OF  DISTANCE.  81 

and  trans-Missouri  business  from  Omaha,  this  vast  traffic 
giving  them  the  necessary  volume  which  enables  them  to 
make  and  partake  of  low  rates  at  a  profit.  When  it  is  known 
that  the  transcontinental  lines  ending  at  St.  Paul  are  either 
from  interest  or  inclination  not  allowed  to  give  these  roads 
much  business,  it  can  be  seen  that  the  lines  of  the  two  roads 
mentioned  which  pass  through  Wisconsin  are  semi-local 
lines,  and  not  in  position  to  secure  the  necessary  volume  of 
traffic  to  assure  low  rates. 

The  business  condition  of  the  two  sections  of  road,  on 
the  face  of  it,  to  a  traffic  man  would  show  that  en  the  business 
passing  through  Iowa  a  freight  charge  twenty-five  per  cent 
lower  than  one  in  Wisconsin  would  be  profitable,  wrhile  in 
Wisconsin  it  would  eliminate  all  chance  for  dividends. 

The  rate  per  ton  per  mile  is  lower  in  Iowa  than  Wiscon- 
sin, and  the  Lake  Shore  and  the  Pennsylvania  railroads  make 
money  carrying  freight  for  one-half  what  is  charged  in  Iowa, 
and  still  no  man  is  wronged  or  "unreasonable"  rates  charged 
in  either  instance. 

The  Pennsylvania  Railroad  system  keep  their  books 
so  that  different  sections  of  their  road  give  separate  account- 
ing. 

In  1904  on  the  main  stem  portion  of  this  road,  the  aver- 
age rate  per  ton  per  mile  was  .559  cents,  while  on  that  por- 
tion in  New  Jersey  the  rate  charged  was  1.041  cents,  and 
it  is  also  shown  that  while  there  was  a  profit  of  0.181  cents 
per  ton  per  mile  on  the  main  stem,  but  o .  188  profit  was  made 
in  hauling  over  the  New  Jersey  division,  although  the  charge 
was  nearly  twice  as  much.  No  man  was  wronged  by  the 
higher  charge  as  the  company  evidently  made  no  more  money 
in  one  case  than  another  and  both  rates  were  "reasonable." 

It  is  evident  from  the  result  that  the  concentration  of  traffic 
over  the  main  stem  enabled  cheap  rates  to  pay  about  as  much 
profit  as  the  higher  rate  in  New  Jersey.  The  majority  of 
our  railroad  managers  strain  every  point  in  favor  of  shippers 
with  a  view  of  building  up  a  business  in  the  future  for  their 
companies. 

They  do,  and  should  give  favorable  rates  where  busi- 
ness allows  them  to  do  so,  and  make  a  profit ;  but  nearly  every 
road  in  the  United  States  has  different  problems  presented, 
and  any  general  rule  that  could  be  adopted  would  be  hon- 
ored more  in  its  violation  than  acceptance. 


82  SOCIALISM  OR  EMPIRE. 

There  are  a  few  railroad  men  still  in  control  of  affairs 
who  do  not  grasp  the  transportation  question  in  its  broader 
sense,  but  they  are  on  little  local  roads  impossible  of  con- 
trol through  general  government  laws.  I  know  of  timber 
roads  chartered  as  Railways  on  which  no  tariff  at  all  is  pro- 
mulgated, and  even  if  you  wish  to  ride  over  it,  you  pay  what 
they  think  is  right,  but  no  general  law  could  be  framed  to 
"control"  them,  because  they  are  owned  by  private  parties, 
and  built  for  their  own  use. 

Now  by  the  use  of  the  rate  making  power  our  railroad 
systems  have  enabled  the  Lumberman  from  Oregon  to  sell 
lumber  in  St.  Paul  the  center  of  the  lumber  interest  of  the 
northwest;  they  have  enabled  the  wheat  growers  of  the 
Mississippi  valley  to  send  flour  to  Japan,  through  the  wheat 
fields  of  Oregon;  they  have  enabled  the  oranges  of  California 
to  compete  with  those  of  Florida  and  have  driven  foreign 
oranges  from  the  market.  The  melons  of  Rocky  Ford, 
Colorado,  are  distributed  in  the  cities  along  either  coast. 
I  today,  here  at  Catalina  Island  in  the  Pacific,  buy  Grand 
Junction,  Colorado  apples  in  preference  to  California  apples. 
The  Greeley,  Colorado,  potatoes  are  found  in  every  great 
city  clear  across  the  continent  and  it  must  be  acknowledged 
that  all  these  things  are  the  result,  first :  of  fierce  competition 
for  business,  and  second:  of  rates  made  which  throw 
this  business  into  the  stream  of  some  great  volume  of  traffic 
created  by  our  peerless  system  of  railroad  rate  manipulation 
and  carried  at  a  cost  so  low  as  to  hardly  affect  the  price  of 
the  commodity  in  the  market.  In  fact  I  would  advise  a 
man  to  go  to  New  York  if  he  wishes  to  purchase  California 
oranges,  or  California  to  buy  Colorado  fruit,  because  he 
would  get  good  selection  at  those  places,  while  at  home  the 
dealers  seem  to  want  to  work  off  the  poorest  stock. 

The  provision  recommended  by  the  President  to  "make 
any  low  rate  put  in  force  by  a  railroad  the  maximum  rate 
to  be  charged",  would  bring  all  of  this  kind  of  business  to 
a  standstill  with  a  jerk. 

It  will  enable  the  California  fruit  grower  to  complain 
to  the  Commission  and  any  rate  that  the  Commission  could 
consider  would  prevent  the  Colorado  fruit,  potatoes  or  melons 
from  competing  here,  but  the  Calif ornian  who  makes  the 
protest  would  naturally  destroy  his  eastern  market  at  the 
same  time. 


ELIMINATION  OF  DISTANCE.  OS 

The  lumber  men  of  Minnesota  and  Michigan  could  stop 
the  competition  from  Oregon,  while  the  wheat  grower  of 
Oregon  could  prevent  the  Mississippi  valley  wheat  from 
competing  with  him  in  the  trade  of  the  Orient,  but  do  the 
people  of  the  United  States  want  these  things? 

In  the  chapter  on  German  railroads  the  results  of  regu- 
lation will  be  shown  plainly  because  there  the  government 
is  so  hampered  by  demands  of  the  different  provinces  that  rail- 
road rates  should  be  made  so  as  not  to  allow  one  section  to  com- 
pete with  another,  that  the  railroads  are  practically  but  local 
feeders  to  canal  systems,  and  their  purposes^for  general 
transportation  destroyed. 

Through  the  system  adopted  in  the  United  States  a 
complete  check  is  made  on  local  extortion  and  everything 
which  is  eaten  or  used  by  man  or  beast  feels  the  equalizing 
effect  of  competition,  one  locality  with  another. 

It  is  this  feature  in  our  economic  situation  which  has 
advanced  us  in  business  enterprise  far  ahead  of  any  nation. 
The  partial  elimination  of  distance  in  our  transportation 
problem  has  enabled  industries  to  thrive  and  great  popula- 
tion to  survive  and  flourish  at  localities  which  otherwise 
would  be  barren  waste. 

Once  this  attempted  protection  be  given  one  lo- 
cality from  the  competition  of  another  and  the  order  go  forth 
from  the  government  through  the  Inter  State  Ccmmerce 
Commission  and  enforced;  instead  of  thirty-five  exceptions 
being  ordered  as  England  experienced  during  the  first  year 
of  their  last  law's  enforcement,  it  would  take  a  dray  to  haul 
the  complaints  to  the  office  of  the  Commission. 

It  is  needless  to  say  that  it  would  localize*" traffic  and 
it  would  be  a  conclusion  of  the  era  of  declining  freight  charges 
in  the  United  States. 


84  SOCIALISM  OR  EMPIRE. 


CHAPTER.  XII. 

WHAT  is  A  REASONABLE  RATE? 

In  the  rate  regulation  legislation,  the  provision  which 
is  expected  to  be  framed  so  as  to  get  around  the  constitution 
is  the  one  that  the  commission  be  given  power  to  fix  a  "just 
reasonable  and  fairly  remunerative  rate  which  shall  be  the 
maximum  rate  to  be  charged." 

As  the  volume  of  traffic  has  so  much  to  do  with  the 
matter,  this  would  naturally  be  a  difficult  thing. 

While  the  Lake  Shore  Railroad  makes  great  profit  in 
charging  but  o .  50  cents  per  ton  per  mile  I  know  of  a  west- 
ern road  which  went  into  bankruptcy  although  their  aver- 
age charge  was  3^  cents  per  ton  per  mile. 

The  only  railroad  owned  by  the  United  States  (The 
Panama  Railroad)  charged  7.07  cents  per  ton  per  mile  in 
1905  and  only  earned  5  per  cent,  on  the  investment  at  that. 
In  England  the  lowest  maximum  rate  set  on  traffic  amounts 
to  o .  8  cents  per  ton  per  mile  on  "A"  class  (the  lowest)  and  on 
the  same  road  a  charge  of  5  cents  per  ton  per  mile  is  allowed 
on  fifth  class  goods,  and  this  for  the  long  distance  haul;  while 
for  short  distances  the  maximum  allowed  is  2  3-10  on  the 
"A"  class  and  8  6-10  cents  on  the  higher  class. 

If  the  commission  were  to  call  the  figures  allowed  by 
the  Board  of  Trade  of  England,  or  charged  by  the  Panama 
Railroad  "a  reasonable  rate"  the  railroad  men  of  the  Unit- 
ed States  generally  would  never  know  of  its  existence, 
but  some  railroad  struggling  against  adversity  would  have 
to  cease  operations. 

In  constructing  such  a  vast  system  as  we  have  today, 
mistakes  have  been  made:  railroads  have  been  constructed 
to  localities  where  it  is  impossible  to  obtain  the  amount  of 
traffic  which  would  enable  the  road  to  make  a  "reasonable" 
tariff  and  live;  it  is  a  fight  for  existence,  and  while  a  ccmpari- 


REASONABLE  RATES.  85 

son  of  rates  charged  others  would  impress  the  residents  along 
the  line  that  they  were  being  robbed  and  discriminated 
against,  it  was  only  their  own  misfortune  in  getting  in  the 
same  position  in  which  the  company  found  itself. 

Other  roads  depending  upon  mining  camps  or"  timber 
for  profit,  even  while  carrying  a  volume  of  traffic  which 
should  apparently  warrant  low  rates,  have  to  figure  out  not 
only  an  interest  on  the  investment,  but  a  return  of  the  prin- 
ciple to  owners  in  a  certain  term  of  years. 

.  The  timber  disappearing  or  the  mining  camp  "playing 
out"  is  one  of  the  speculations  in  the  railroad's  construction 
and  being  speculative  is  entitled  to  a  higher  return  than 
other  forms  of  investment. 

The  physical  features  of  a  railroad  also  have  a  govern- 
ing effect  on  cost  of  transportation  to  such  an  extent  that 
what  would  be  a  "reasonable"  rate  for  one  road  would  bring 
bankruptcy  to  another. 

While  our  railroad  engineers  have  now  developed  a  sys- 
tem of  equating  curves  and  grades  to  a  level  for  the  purpose 
of  determining  cost  of  operation  and  earning  capacity  of 
a  railroad,  it  is  not  an  exact  science,  but  some  of  the  results 
already  obtained  are  startling.  It  is  found  that  cost  of  train 
service,  operation  and  maintenance  of  some  sections  of  road 
are  seven  times  more  expensive  than  others.  In  other  words 
that  it  would  be  "cheaper"  to  have  operated  a  road  seven 
times  longer  around  some  obstacle  than  to  surmount  the 
obstacle  with  a  4  per  cent,  grade. 

The  figures  furnished  in  regard  to  advisability  of  changes 
in  grade  and  route  of  our  great  western  roads  are  a  revelation 
in  many  ways,  and  it  is  safe  to  say  that  from  Cheyenne  to 
San  Francisco  before  the  changes  are  completed  one-third 
of  the  Union  and  Central  Pacific  Railroads  wil^  run  over 
lines  different  from  what  the  roads  were  first  constructed  upon. 

In  all  of  these  changes  the  grade  has  been  reduced  be- 
cause it  has  been  clearly  developed  that  no  matter  how  easy 
the  grade,  every  foot  the  load  is  "lifted"  it  takes  as  much 
power,  as  a  direct  lift  would  require.  A  reasonable  rate 
for  the  New  York  Central  road  would  not  pay  for  the  coal 
used  on  roads  crawling  up  the  mountains  to  Cripp1e  Creek. 

It  will  be  found  that  nine-tenths  of  the  complaint  charg- 
ing that  rates  are  too  high,  come  from  people  living  in  the 


86  SOCIALISM  OR  EMPIRE. 

localities  I  mention  and  if  the  law  would  succeed  in  giving 
power  to  the  commission  to  order  a  change  satisfactory  to 
the  complainants,  it  would  be  a  practical  seizure  of  the  prop- 
erty of  the  road. 

It  may  be  in  the  province  of  congress  to  order  that  the 
rates  of  freight  on  inter  state  commerce  shall  not  be  higher 
than  some  definite  rate  named  in  a  law,  and  anything  it 
could  say  in  regard  to  discrimination  (one  locality  against 
another)  would  necessarily  have  to  be  that  the  ports  of  one 
state  should  have  no  preference  over  another.  If  it  would 
make  the  lawful  rate  the  present  average  in  the  United  States 
(i.  e.  0.76  cents  per  ton  per  mile)  it  would  ruin  all  of  the 
trans-Mississippi  railroads  and  if  they  adopted  the  English 
idea  of  "reasonable"  rates,  the  railroad  men  and  shippers 
alike  would  think  congress  was  perpretrating  a  joke  on  the 
people,  or  had  gone  daft. 

It  can  thus  be  seen  that  a  power  to  declare  what  a 
reasonable  rate  should  be,  would  of  necessity  give  the  execu- 
tive department  positive  affirmative  control  of  railroad  rates. 

Without  this  affirmative  and  discretionary  power  is 
granted,  any  law  that  could  be  passed  would  work  injury 
instead  of  a  benefit  to  the  public,  and  if  it  is  given,  a  pre- 
judiced commission  could  ruin  the  railroad  investments  of 
one  section  of  our  country  and  let  the  favored  sections  thrive. 

Any  power  such  as  is  proposed  would  work  disaster 
and  cause  loss  to  the  business  men  of  the  United  States. 
It  might  give  satisfaction  to  the  semi-socialists  who  want 
the  government  to  "run  everything/'  but  it  would  stop  all 
future  investment  in  new  railroad  ventures  and  unsettle 
our  business  affairs  for  a  term  of  years. 

Nearly  all  of  the  special  low  rates  which  have  been  given 
during  the  past  few  years,  have  been  brought  about  by  rail- 
road men  trying  to  load  empty  cars  back  from  some  section 
of  country  where  the  traffic  usually  is  all  one  way. 

It  is  a  clear  business  proposition  for  a  railroad  to  make 
a  rate  far  lower  than  its  general  traffic  rate  for  such  a  pur- 
pose, and  it  certainly  is  no  business  of  the  government  to 
say  to  the  road  that  because  it  hauls  the  freight  at  £  cent 
a  ton  a  mile  for  the  man  who  gives  return  freight  for  empty 
equipment,  that  it  should  be  considered  the  "reasonable" 
rate  between  the  points  named.  While  it  would  give  A. 
a  lower  rate  westward  than  B.  would  receive  eastward  over 


REASONABLE  RATES,  87 

the  same  piece  of  track,  there  would  be  good  business  reasons 
for  doing  so,  and  the  railroad  men  should  le  allowed  to  tell 
B.  frankly  why  the  low  rate  was  given  A.,  and  explain  that 
feature  to  him. 

If  the  Inter  State  Commerce  Commission  did  not  take 
such  things  into  consideration  it  would  work  injury  to 
both  the  railroad  and  the  shipper  alike. 

It  will  be  seen  that  there  are  so  many  elements  connected 
with  rate  regulation  that  it  could  not  be  handled  by  the 
executive  department  without  a  discretionary  initiative 
power  being  given,  which  would  re\  olutionize  our  whole 
system  of  government. 

I  have  called  attention  in  former  chapters  to  the  fact 
that  it  was  not  the  intention  that  the  executive  or  even  the 
congress  should  have  such  discretionary  power.  The  con- 
gress can  pass  a  law,  and  the  executive  department  execute 
the  same,  that  is.  all. 

I  will  not  dilate  on  the  feature  which  provides  that  the 
Inter  State  Commerce  Commission  shall  have  the  right  to 
investigate  books  and  papers,  and  determine  what  profit 
should  be  made,  because  every  American  citizen  should 
know  that  this  would  be  wrong  and  an  unspeakable  outrage, 
under  our  constitution. 

I  know  that  lawyers  will  plead  that  while  such  a  right 
is  guaranteed  a  private  citizen,  that  through  charter  privi- 
leges given  a  corporation  the  citizens  joining  in  the  venture 
lose  their  rights  because  they  enter  into  a  semi-public  ser- 
vice. That  the  courts  have  evolved  one  law  for  corpora- 
tions and  another  for  private  citizens,  and  assume  that  be- 
cause of  the  right  of  eminent  domain  given  railroads  they 
lose  about  all  rights  they  should  have  as  owners  of  property. 
Now  I  am  not  a  lawyer  and  have  had  very  little  to  do  with 
the  courts,  but  if  such  is  the  case  the  quicker  parties  owning 
the  railroads  get  their  property  into  private  hands  it  would 
be  for  the  better. 

I  have  been  foolish  enough  to  give  a  share  apiece  to  men 
to  enable  them  to  become  directors  in  companies  I  have  or- 
ganized, but  I  never  thought  that  by  putting  my  property 
into  a  corporation,  so  that  sales  of  stock  could  be  made,  that 
I  was  losing  some  of  the  most  sacred  rights  guaranteed  me 
by  the  founders  of  our  government.  Our  railroads  are  owned 
by  private  citizens  banded  together  into  companies  and 


88  SOCIALISM  OR  EMPIRE. 

should  be  protected  in  fundamental  rights,  and  if  they  do 
not  receive  that  protection  it  is  a  slip  in  the  cog  wheel  of  justice. 

The  right  of  eminent  domain  granted  railroads  is  so 
peculiarly  guarded  by  our  constitution  that  it  omy  means 
that  a  road  can  get  what  they  need  by  paying  for  it. 

The  right  of  eminent  domain  granted  railroads  is  one 
enjoyed  by  its  patrons  through  ability  to  reduce  distance 
and  is  used  but  seldom,  as  the  property  is  bought  usually 
at  private  sale  rather  than  call  on  the  courts  for  decisions. 

A  corporation  should  be  protected  in  its  private  busi- 
ness affairs  the  same  as  the  private  citizen,  and  their  houses, 
papers  and  effects  should  be  held  as  inviolate  as  other 
property  owners. 

It  can  be  seen  that  no  general  law  could  define 
what  a  just  and  reasonable  rate  should  be,  because  nearly 
every  railroad  in  the  country  has  different  conditions; 
and  if  such  a  power  should  be  delegated  to  a  commission 
it  would  necessarily  allow  this  branch  of  government  to 
make  a  thousand  laws  and  set  in  judgment  on  the  same, 
without  a  jury  to  determine  facts. 

The  provision  obliging  thirty  days  notice  to  be  given 
before  a  tariff  could  be  changed  is  not  even  good  business 
sense,  and  the  Inter  State  Commerce  Commission  will  be 
about  the  first  to  ask  for  its  suspension. 

Such  a  provision  is  undoubtedly  within  the  power  of 
congress  and  it  is  about  the  only  one  of  the  nine  points  I  call 
to  the  attention  of  the  reader  which  comes  under  that  head, 
but  it  is  fully  as  bad  as  the  long  and  short  haul  provision, 
or  the  anti-rebate  legislation  already  on  the  statute  books. 

Emergencies  arise  when  the  public  could  demand  a  change 
"at  once"  to  relieve  distress  or  save  property. 

In  the  fall  of  the  year  market  conditions  frequently 
require  a  change  of  direction  of  shipments  for  whole  crops, 
which  do  not  develop  until  the  shipment  commences.  I 
have  acted  as  arbitrator  between  the  railroads  and  the  peo- 
ple of  the  "Western  Slope"  in  Colorado  in  just  such  an  emer- 
gency. The  potato  market  had  become  glutted  in  one  di- 
rection and  it  was  referred  to  me  to  recommend  what  should 
be  done,  I  made  the  recommendation  and  it  was  acted  on  "at 
once, "and  if  thirty  days  had  intervened,  thousands  of  dollars 
would  have  been  lost,  not  by  the  railroads,  but  the  farmers. 

Galveston  would  have  had  to  wait  thirty  days  to  get 


REASONABLE  RATES.  89 

cheap  relief  in  her  distress,  and  there  are  hundreds  of  in- 
stances where  the  power  to  act  quickly  has  saved  our  people 
millions  of  dollars  through  the  transportation  companies  step- 
ping into  the  breach  at  the  proper  time. 

The  part  of  the  law  which  would  delegate  power  to  the 
commission  to  determine  whether  cars  had  been  furnished 
properly  and  impose  fines  in  case  their  idea  of  distribution 
of  rolling  stock  was  not  obeyed,  is  but  in  line  with  those  other 
powers  which  practically  would  allow  them  to  control  rail- 
road transportation  without  even  claiming  to  represent  the 
owners  of  the  property. 

While  the  advocates  of  this  legislation  say  it  amounts 
to  nothing,  and  the  President  says  it  is  only  a  form  of  inno- 
vation, if  the  nine  features  which  I  have  criticised  do  not  put 
our  railroad  investments  under  such  a  form  of  supervision, 
as  to  destroy  all  chance  of  independent  action  by  the  owners 
of  the  property,  I  certainly  fail  to  understand  the  situation. 
The  silly  pass  provision  in  the  law  is  a  violation  of  the  rights 
of  property  owners  and  if  a  test  were  made  it^  would  be  de- 
clared unconstitutional. 

It  would  be  well  within  the  province  of  congress  to  pro- 
hibit government  employees  or  officers  from  accepting  such 
favor  or  railroads  from  giving  them. 

States  could  do  the  same  in  regard  to  state  or  county 
officials;  but  to  attempt  to  prevent  a  railroad  company  from 
complimenting  friends,  or  reciprocating  'courtesies  with 
newspaper  men  and  others,  is  as  ridiculous  as  it  would  be 
if  they  were  to  attempt  to  make  it  a  misdemeanor  for  a  man 
to  present  a  friend  with  a  cigar  or  dinner,  or  a  farmer  to  haul 
his  neighbor  to  town  in  his  wagon  without  demanding  pay. 

This  section  of  the  law  is  intended  to  please  the  agita- 
tor but  as  it  singles  out  railroad  interests  in  its  attempt  to 
create  a  criminal  offense  out  of  a  complimentary  courtesy 
or  personal  gift,  it  is  class  legislation  of  the  rankest  kind. 

If  congress  would  pass  a  law  making  it  a  criminal  offense 
for  a  packing  house,  mercantile  company  or  coal  corporation 
to  give  away  a  present,  the  people  would  say  that  our  law- 
makers had  gone  crazy  but  such  action  would  be  no^more 
unreasonable  than  this  provision. 

It  is  an  unwarrantable  interference  on  the  part  of^ gov- 
ernment with  private  owned  property. 


90  SOCIALISM  OR  EMPIRE. 


CHAPTER.  XIII. 

LONG  AND  SHORT  HAUL  AND  SPECIAL  RATES. 

The  power  granted  the  Congress  to  "regulate  commerce 
among  the  several  states"  has  been  used  rightfully  in  sev- 
eral instances,  although  it  is  a  question  as  to  whether  these 
regulations  benefit  the  public. 

When  congress  made  it  unlawful  for  a  road  to  charge 
more  for  a  short  haul  than  a  long  one,  and  when  it  made 
it  unlawful  for  railroads  to  make  a  difference  in  charges  be- 
tween shippers,  by  any  "special  rates,  rebate,  drawback  or 
other  device"  or  the  granting  of  any  undue  preference  to 
any  individual  or  species  of  traffic,  and  when  it  prohibited 
the  formation  of  "pools"  or  agreements  of  railroads  in  the 
restraint  of  trade  between  states  it  was  well  within  its  rights. 

In  the  last  legislation  the  provision  that  no  change  in 
rates  shall  be  made  without  thirty  days  notice  comes  right- 
fully under  the  "regulation  of  commerce." 

In  the  previous  chapter  I  call  attention  to  the  fact  that 
this  latter  provision  is  not  for  the  benefit  of  the  people,  and 
two  of  the  three  other  "regulative"  provisions  have  done 
more  injury  than  good  to  the  public. 

That  a  rate  should  not  be  higher  on  a  short  haul  than 
a  long  one  looks  like  a  good  thing,  as  an  abstract  proposition, 
but  ever  since  this  law  has  been  on  the  statute  books  the 
Inter  State  Commerce  Commission  has  been  granting  ex- 
ceptions to  the  law. 

It  was  long  ago  recognized  that  strict  observance  of  this 
law  was  "impracticable"  without  great  injury  to  business 
interests. 

The  competition  offered  the  railroads  by  water  trans- 
portation and  Canadian  railroads,  obliged  them  to  make 
competitive  tariffs  to  points  affected,  and  if  the  prices  charged 
this  competitive  business  was  to  be  made  the  limit  of  charge 


SPECIAL  RATES.  91 

allowed,  it.  would  have  completely  stopped  all  competition 
on  the  part  of  trans-continental  roads  and  many  others, 
with  water  transportation. 

The  Commission  after  recognizing  this  necessity  has 
drifted  along  so  as  to  consider  the  "constructive"  railroad 
centers  in  the  same  light,  which  is  right. 

In  its  last  report  the  Commission  recited  the  Chatta- 
nooga and  Nashville  controversy  over  rates  from  New  York, 
and  it  put  itself  on  record  as  saying  that  it  could 
not  see  that  it  was  wrong  to  charge  more  to  Chattanooga 
than  to  Nashville  on  business,  part  of  which  passed  through 
Chattanooga  on  its  way  to  Nashville,  on  account  of  the  ne- 
cessity to  meet  competition  there,  and  as  it  could  not 
decide  the  rate  to  Chattanooga  to  be  an  "unreasonable" 
one,  it  let  the  practice  stand. 

One-quarter  of  the  hearings  before  the  commission  have 
been  over  features  of  this  law,  and  there  are  few  great  sys- 
tems of  railroad  but  which  have  been  granted  exceptions 
from  a  strict  following  of  the  text. 

Some  of  the  things  done  by  the  railroads  and  counte- 
nanced by  the  Commission  are  positively  ridiculous.  The 
transcontinental  roads  are  allowed  to  make  rates  to  San 
Francisco  and  Los  Angeles  in  competition  with  the  Ocean- 
Panama  route,  so  that  the  rate  from  New  York  to  San  Fran- 
cisco would  be  say  $1.50  per  100  Ibs.  on  machinery. 

If  a  party  at  Reno,  Nevada,  would  wish  to  buy  a  car 
of  machinery,  unless  he  accepts  the  rate  that  would  accumu- 
late by  shipping  to  Chicago,  thence  to  Salt  Lake  and  from 
there  to  Reno,  and  which  would  possibly  amount  to  $2.50 
per  100  Ibs.,  he  ships  to  San  Francisco,  and  it  is  returned  to 
Reno  on  a  rate  of  say  40  cents  per  100  Ibs. 

This  would  be  a  saving  to  him  in  freight  as  it  would 
only  amount  to  1.90  per  hundred,  but  owing  to  this  foolish 
long  and  short  haul  provision  and  the  rulings  of  the  Inter 
State  Commerce  Commission,  the  railroad  could  not  let  him 
take  off  his  machinery  at  Reno  on  its  way  west,  but  the 
company  actually  hauls  it  to  the  coast  and  back  to  Reno, 
and  the  shipper  waits  a  week  for  this  "doubling"  process. 

He  would  have  gladly  paid  the  $1.90  and  would  have 
considered  it  a  "reasonable"  rate,  but  the  delay  is  forced 
upon  him  by  law. 

This  feature  is  one  of  the  most  maddening  things  that 


92  SOCIALISM  OR  EMPIRE. 

occur  in  the  "plateau"  country  of  this  continent,  and  I  have 
heard  railroad  men  damned  more  roundly  over  this  apparent 
nonsense  than  anything  else,  but  it  is  the  direct  result  of 
the  first  "reform"  law  demanded  by  the  "people"  i.  e.  the 
Farmers'  Alliance  in  the  Eighties.  If  the  law  was  off  the 
books  the  railroad  men  in  their  efforts  to  please  their  cus- 
tomers would  long  ago  have  corrected  this  foolish  move, 
and  would  be  glad  to  relieve  themselves  from  the  haul,  over 
the  Sierra  Nevada  mountains  and  back. 

In  a  parallel  case  to  this  on  traffic  passing  from  the 
Pacific  to  Omaha  one  of  the  constructive  railroad  centers 
of  distribution,  the  same  principle  was  observed  in  the  "Kearn- 
ey sugar  rate."  It  appears  the  rate  to  Omaha  from  San 
Francisco  was  50  cents  per  100  and  the  railroad  charged  77 
cents  per  100  Ibs.  San  Francisco  to  Kearney,  Nebraska, 
196  miles  west  of  Omaha,  the  27  cents  additional  being  the 
rate  back  to  Kearney  from  Omaha.  The  Commission  as- 
sumed that  the  rate  should  be  65  cents  to  Kearney  instead 
of  77,  but  the  court  found  that  the  low  rate  to  Omaha  was 
justified  by  competition,  and  that  the  rate  to  Kearney  had 
not  been  found  unreasonable  in  itself,  and  did  not  allow 
the  change,  and  these  things  have  to  continually  be  except- 
ed  under  the  long  and  short  haul  provisions  of  the  present 
law. 

These  instances  are  only  given  to  show  the  imprac- 
ticability of  any  kind  of  government  rate  regulation  which 
could  be  devised  and  that  even  the  law  regarding  the  long 
and  short  haul  has  been  and  necessarily  is  violated  every 
day,  and  the  necessity  recognized  not  only  by  the  Inter  State 
Commerce  Commission,  but  the  courts  themselves. 

In  the  law  against  special  rates  it  will  be  found  that  un- 
less changes  are  made  either  by  court  interpretation  or  change 
in  the  law  itself,  an  unintentional  injury  to  great  business 
ventures  will  be  done. 

While  it  is  well  to  have  an  open  rate  for  all  there  should 
be  exceptions  made  in  the  tariffs  themselves,  or  all  past 
ideas  in  regard  to  business  would  be  overthrown. 

The  principle  of  doing  a  wholesale  business  is  estab- 
lished in  trade  all  over  the  world,  and  if  it  could  be  construed 
that  a  manufacturer  who  ships  one  car  of  freight  per  day, 
should  receive  as  low  a  rate  as  the  shipper  of  fifty  cars,  it 


SPECIAL  RATES.  93 

would  take  from  the  railroads  the  power  to  sell  transporta- 
tion by  wholesale  and  allow  all  other  business  to  recognize 
and  practice  this  business  prerogative. 

It  may  be  that  the  law  making  a  secret  rebate  a  felony 
is  right,  although  the  secret  rebate  has  been  used  more  to 
cloak  the  operations  of  one  competitive  road  against  an- 
other, than  to  advance  one  shipper  or  injure  another,  and 
when  the  rebate  has  been  given,  in  every  instance  a  demand 
for  tonnage  sufficient  to  make  up  in  volume  of  traffic  for 
the  lower  rate  charged,  was  undoubtedly  made.  In  the 
chapter  explaining  the  importance  of  a  volume  of  traffic 
and  the  necessity  of  making  some  special  low  rates  to  load 
return  equipment,  it  can  be  seen  that  "special"  rates  are  nec- 
essary to  bring  profit  to  many  transportation  companies. 
This  principle  is  recognized  fully  on  the  German  railroads, 
and  is  countenanced  in  every  country  where  the  government 
controls  or  operates  railroads;  it  is  a  business  necessity. 

The  question  as  to  whether  such  wholesale  contracts 
for  transportation  should  be  published  is  another  matter, 
but  that  special  rates  are  a  necessity  in  successfully  hand- 
ling transportation  cheaply,  there  can  be  no  question. 

The  most  valuable  regulation  which  has  been  passed 
by  Congress  in  its  attempts  to  regulate  inter  state  commerce 
to  my  mind,  is  the  one  preventing  combinations  in  restraint 
of  trade. 

For  years  before  the  law  was  passed  I  had  been  an  ad- 
vocate for  some  anti-pooling  law,  and  had  discussions  with 
many  prominent  :_railroad  men  over  this  feature.  I  will 
acknowledge  that  nearly  every  prominent  and  successful 
railroad  man  disagreed  with  me  and  that  I  felt  great  satis- 
faction when  the  Supreme  Court  decided  that  pools  were 
illegal.  As  a  student  in  economics  I  had  always  felt 
that  about  the  only  regulation  necessary  (outside  of 
those  protecting  the  public  safety  in  travel)  was  this  pro- 
vision, and  that  competition  would  do  the  rest.  I  always 
felt  that  the  public  would  get  better  service  from  competi- 
tive endeavor  than  they  could  receive  through  laws  of  any 
kind. 

It  is  not  necessary  to  extend  the  argument  for  and  against 
the  law  against  pooling,  because  I  believe  it  a  good  law  and 
in  the  interest  of  the  people  and  if  it  is  made  to  control  all 


94  SOCIALISM  OR  EMPIRE. 

combinations  in  any  kind  of  business,  it  will  answer  a  good 
purpose.  However,  I  see  that  parties  high  in  the  Govern- 
ment counsels  advocate  a  law  allowing  pools  of  some  sort 
to  save  flighty  railroad  men  from  themselves  in  the  matter 
of  making  low  competitive  rates. 

After  this  wave  of  "reform"  which  appears  to  want 
the  government  to  control  and  regulate  everything  has  passed, 
it  will  be  found  that  Senator  Sherman,  who  of  all  men  would 
hate  to  be  classed  as  a  "reformer"  had  placed  on  the  statute 
books  the  only  truly  statesmanlike  provision  governing 
business  combinations,  and  the  only  law  under  which  the 
Commission  has  had  favorable  rulings  by  the  Supreme  court. 

The  Inter  State  Commerce  law  and  the  acts  of  the  Com- 
mission have  only  complicated  business  matters,  and  this 
present  legislation  will  only  increase  that  complication. 

The  framers  of  the  original  law  were  tricksters  in  poli- 
tics trying  to  secure  favor  with  what  was  thought  at  the 
time  to  be  a  political  factor,  and  the  present  legislation  is 
the  direct  result  of  the  wave  of  semi-socialism  passing  over 
the  country. 

The  whole  idea  of  a  commission  is  wrong  and  it  only 
tends  to  build  up  the  power  of  our  executive  department 
and  interfere  in  business  affairs  to  no  good  end. 

It  was  an  un-American  move  in  the  first  place  and  it 
is  an  error  to  enlarge  or  increase  its  power. 


WATERED  STOCK.  95 


CHAPTER  XIV. 

WATERED  STOCK. 

In  nearly  every  argument  advanced  by  the  so  called 
"reformers"  in  regard  to  rate  regulation  the  charge  is  made 
that  so  much  of  the  apparent  value  of  railroads  is  derived 
from  "watered"  stock,  that  an  unfair  rate  has  to  be  charged 
to  pay  dividends  on  inflated  value. 

The  Inter  State  Commerce  Commission  evidently  wish 
to  confirm  this  impression. 

In  their  compilation  of  statistics  they  continue  to  du- 
plicate all  of  that  value  represented  through  the  issuance 
of  new  securities  based  on  the  stock  and  bond  purchases 
of  other  roads,  and  make  up  their  estimate  of  capitalization 
from  these  inflated  figures.  Using  this  form  of  duplication 
the  Commission  figures  that  on  June  30,  1903,  there  were 
207,977  22-1  oo  miles  of  railroad  in  the  United  States,  capi- 
talized for  $12,599,990,258  or  "$63,186  per  mile."  If  you 
take  the  trouble  to  divide  these  amounts  quite  a  material 
error  will  be  detected  but  as  they  report  that  the  roads  own 
$2,318,391.953  of  stocks  and  bonds  and  have  issued  other 
securities  based  on  these  holdings,  it  can  be  seen  that  but 
$10,281,598.305  had  been  issued  on  railroad  mileage,  and 
if  that  amount  is  divided  by  207,977  it  equals  $49,436  instead 
of  the  sum  stated  by  them. 

The  President  in  his  message  says  that  the  Commission 
should  supervise  and  regulate  and  prevent  "abuses  in  no 
way  connected  with  restriction  of  competition." 

"Of  these  abuses,  perhaps  the  chief,  although  by  no 
means  the  only  one,  is  over-capitalization — generally  it- 
self the  result  of  dishonest  promotion — because  of  the  myriad 
evils  it  brings  in  its  train;  for  such  over  capitalization  often 
means  an  inflation  that  invites  business  panic;  it  always 
conceals  the  true  relation  of  the  profit  earned  to  the  capital 


96  SOCIALISM  OR  EMPIRE. 

actually  invested,  and  it  creates  a  burden  of  interest  pay- 
ments which  is  a  fertile  cause  of  improper  reduction  in  or 
limitation  of  wages;  it  damages  the  small  investor,  discour- 
ages thrift,  and  encourages  gambling  and  speculation;  while 
perhaps  worst  of  all  is  the  trickiness  and  dishonesty  which 
it  implies — for  harm  to  morals  is  worse  than  any  possible 
harm  to  material  interests,  and  a  debauchery  of  politics 
and  business  by  great  dishonest  corporations  is  far  worse 
than  any  actual  material  evil  they  do  the  public.  Until 
the  national  government  obtains  in  some  manner  which  the 
wisdom  of  the  congress  may  suggest,  proper  control  over 
the  big  corporations  engaged  in  inter  state  commerce,— 
that  is,  over  the  great  majority  of  the  big  corporations — it 
will  be  impossible  to  deal  adequately  with  these  evils." 

If  any  board  or  government  commission  is  to  have  the 
power  to  "initiate"  rates,  this  is  an  important  point  to  be 
considered,  and  it  only  shows  how  far  this  supervisory  power 
to  make  just  and  reasonable  rates  on  railroads  carries  the 
government. 

It  of  necessity  will  have  to  go  clear  into  the  most  sacred 
privacy  of  this  class  of  business  to  be  able  to  act  fairly  or 
even  intelligently. 

In  this  matter  the  statistitian  of  the  Inter  State  Com- 
merce Commission  through  assisting  in  the  compilation  of 
bulletin  No.  21  of  the  Census  department,  pretending  to 
give  the  commercial  value  of  railroads  in  the  United  States, 
has  rather  upset  any  claim  on  the  part  of  the  government 
as  to  excessive  over  capitalization,  because  his  estimates 
would  go  to  prove  that  the  roads  were  worth  $52,600  per 
mile,  although  they  are  capitalized  at  less  than  $50,000. 

The  fact  is,  there  is  but  little  "over-capitalization"  in 
the  railroads  of  the  United  States  today.  The  publicity 
given  to  railroad  management  and  operation  through 
business  publications  such  as  Poor's  Manual  and  others, 
completely  check  the  successful  issuance  of  a  capital  stock 
much  beyond  real  values.  While  some  active  promoters 
during  the  last  few  years  made  an  attempt  to  work  such  a 
deal  on  one  of  our  great  western  systems,  it  took  but  a  short 
time  for  the  securities  to  find  a  market  price  that  effectively 
squeezed  all  the  water  out  of  them,  through  a  discount  in 
value. 

The  hard  times  among  railroads  succeeding  the  panic 


WATERED  STOCK.  97 

of  1893  brought  about  a  series  of  re-organizations  which 
practically  placed  most  all  of  our  railroad  securities  on  a 
true  property  basis.  The  re-organizations  brought  about 
through  the  efforts  of  Morgan  and  others  in  the  past  few  years 
are  abotft  the  only  instances  of  inflation  that  the  country 
now  suffers  from,  because  in  some  of  these  transactions  a 
"capitalization  of  earnings"  was  attempted  without  keep- 
ing in  view  the  fact  that  capitalization  should  represent 
property. 

Some  of  the  attempts  to  "capitalize  earnings"  already 
have  failed,  and  others  will  surely  fail,  because  it  is  not  a 
correct  business  principle  and  all  of  these  things  regulate 
themselves,  in  a  country  where  competition  is  open,  and  a 
free  hand  given  to  personal  endeavor. 

A  government  commission  could  by  an  investigation 
find  out  how  mueh  it  cost  to  build  a  certian  line  of  road, 
but  should  that  be  assumed  as  the  proper  amount  on  which 
reasonable  rates  should  be  based  to  make  a  profit? 

Certainly  not!  The  Michigan  Southern  Railroad  along 
with  the  Rock  Island,  when  Chicago  was  a  rambling  city 
of  uncertain  future,  bought  ground  clear  down  to  and  beyond 
where  the  Grand  Pacific  Hotel  is  built,  and  today,  own  an 
interest  in  about  120  squares,  extending  from  the  suburbs 
clear  to  the  city's  heart;  can  it  be  supposed  that  the  owners 
of  that  vast  property  in  Chicago  should  only  get  interest 
on  what  it  cost? 

The  Lake  Shore  Railroad  during  the  first  years  of  Com- 
modore Vanderbilt's  ownership  purchased  hundreds  of  acres 
of  land  in  Buffalo,  Erie,  Cleveland  and  Toledo  prior  to  the 
consolidation  with  the  Michigan  Southern,  and  this  land 
is  worth  one  hundred  times  what  it  cost;  would  it  be  right 
to  oblige  the  stock  holders  to  only  accept  a  rate  of  interest 
on  its  cost  and  not  its  value? 

As  an  expert  on  values  I  should  say  that  the  land  owned 
by  the  Lake  Shore  and  Michigan  Southern  Railroad  is  worth 
its  bonded  debt  $50,000,000  if  the  tracks  were  destroyed 
and  the  equipment  run  into  the  lake. 

That  form  of  increase  in  capitalization  is  not  "water" 
and  only  a  semi-socialist  would  consider  it  wrong  to  place 
the  property  owned,  in  such  a  shape  that  the  owners  could 
receive  a  fair  interest  without  an  appearance  of  usury.  The 
real  value  was  there  and  it  was  proper  to  capitalize  it. 


98  SOCIALISM  OR  EMPIRE. 

Because  Commodore  Vanderbilt  had  faith  in  New  York 
City  and  refused  to  sell  the  42nd  Street  stock  yards  when 
they  were  condemned  as  a  nuisance  by  the  growth  of  the 
city  in  that  direction,  and  by  an  additional  expenditure  of 
$9,000,000,  years  ago  constructed  a  great  depot  with  its 
approaches  near  the  present  center  of  New  York,  should 
the  stockholders  of  his  company  only  receive  interest  on  the 
cost,  while  the  Pennsylvania  Company  expends  $100,000.000, 
for  poorer  accommodations  ? 

These  are  features  which  would  oblige  a  government 
Commission  to  investigate  all  the  books,  papers  and  history 
of  each  railroad,  and  become  thoroughly  familiar  with  values 
in  nearly  every  locality  in  the  United  States,  in  addition 
to  the  traffic  operations  presented  by  reports;  before  they 
could  assume  to  rule  that  a  rate  should  be  made  to  pay  any- 
thing less  than  five  or  six  per  cent  on  the  capital  stock  of  a 
Company. 

The  contention  on  the  part  of  our  semi-socialist  friends 
that  the  interest  should  only  be  paid  on  capital  invested, 
would  lead  to  forms  of  injustice  so  palpable  as  to  a  certain 
extent  confiscate  vast  holdings  of  property. 

It  would  be  a  peculiarly  hard  legal  proposition  for  the 
courts  or  the  Commission  to  decide.  The  government  rail- 
ways of  Canada  and  New  Zealand  where  land  is  cheaper 
than  in  the  United  States,  have  cost  $44.600  in  Canada, 
and  over  $45.000  per  mile  in  New  Zealand. 

Now  if  this  average  was  taken  as  the  cost  of  railway 
construction  in  the  United  States,  the  proposition  would  be; 
what  rate  of  interest  is  a  fair  one  on  a  railroad  costing  $45,- 
ooo,  capitalized  at  $49,436.00  (I  have  shown  from  the  Inter 
State  Commerce  Commission's  figures  that  this  is  a  fact) 
and  worth  $52,600.00  per  mile,  the  figures  given  by  the  cen- 
sus department? 

This  is  the  business  proposition  which  has  caused  our 
rapid  advancement  in  railway  construction,  a  speculative 
opportunity  has  been  offered  capital  over  and  above  a  set 
rate  of  interest. 

In  nearly  every  state  tax  reformers  are  assuming  that 
this  increase  in  value  over  cost  of  construction  represents 
an  intangible  value  subject  to  taxation;  and  the  ridiculous 


WATERED   STOCK.  99 

part  of  this  feature  is  that  every  one  of  the  tax  reformers, 
are  also  rate  reformers,  who  claim  that  no  interest  should 
be  collected  by  the  railroads  on  this  value  which  they  wish 
to  tax. 

This  value  is  considered  by  taxingf  authorities  in  many 
states  of  the  Union,  and  the  Inter  State  Commerce  Commission 
would  be  obliged  to  allow  rates  high  enough  to  collect  a  fair 
and  reasonable  rate  of  interest  on  any  value  of  such  a  char- 
acter, or  the  courts  would  interfere  in  the  cause  of  justice. 
The  figures  given  by  the  Census  department  is  such  a  theo- 
retical hodge-podge  as  to  amount  to  nothing,  except  to  show 
that  if  certain  things  were  "thus  and  so"  then  the  railroads 
would  be  worth  $52.600  per  mile.  They  have  developed 
a  value  through  "algebraic  formulas  checked  by  logarithmic 
application"  which  would  cause  the  ordinary  railroad  civil 
engineer  to  have  a  nightmare,  but  their  figures  only  com- 
plicate the  rate  making  power  of  any  government  board, 
if  values  are  to  be  considered. 

If  the  difference  in  original  cost  of  New  York  terminals 
were  to  be  used  as  a  factor  in  determining  what  a  fair  rate 
would  be,  as  between  the  New  York  Central  and  the  Penn- 
sylvania Railroad,  the  New  York  Central  could  drive  the 
Pennsylvania  Railroad  out  of  competitive  business  in  New 
York. 

A  rule  would  have  to  be  made  in  every  case  presented 
the  Commission.  All  of  the  improvements  made  by  our 
railroads,  costing  in  the  past  ten  years  half  as  much  as  or- 
iginal construction,  would  in  justice  only  be  used  in  argu- 
ments for  inrcease  in  rates,  rather  than  cheapening  them 
through  better  facilities  offered  and  lower  grades. 

The  President  evidently  listened  to  the  talk  of  the  de- 
magogues who  have  made  the  attack  of  railroads  a  hobby, 
and  was  misled  into  thinking  that  the  railroads  were  over- 
capitalized. 

The  men  who  told  him  this  are  political  charlatans, 
usually  country  lawyers  claiming  to  understand  the  railroad 
situation,  but  who -in  fact  are  mere  politicians  seeking  popu- 
larity with  the  people  who  appear  to  have  taken  up  part 
of  the  socialist  doctrines  for  the  present. 

Not  one  of  the  men  who  have  taken  an  advanced  stand 


100  SOCIALISM  OR  EMPIRE. 

on  this  question  ever  attempted  a  day's  business  or  any  railroad 
work.  By  looking  at  their  records  it  will  be  found  that  all 
of  the  leaders  in  this  agitation  at  Washington  are  school 
masters  or  lawyers  who  have  shown  no  prominence  or  par- 
ticular ability  in  business  or  railroad  affairs. 

There  is  not  a  railroad  system  in  the  United  States 
but  what  would  be  glad  to  have  5  per  cent,  guaranteed  to  them 
through  some  manipulation  of  rates  which  would  be  sure 
and  legal. 

If  the  provision  is  carried  allowing  a  rate  made  by  the 
the  Commission  to  stand  for  three  years,  a  crop  failure  or 
a  panic  would  tear  down  our  whole  financal  system  and 
cause  thousands  of  millions  loss  to  innocent  investors,  and 
end  in  higher  charges  to  every  buyer  of  transportation. 

No  business  in  the  world  could  stand  inflexibility  such 
as  this  without  disaster. 

Senator  Tillman  in  his  presentation  of  this  feature  to 
the  Senate,  read  a  letter  from  Professor  Marks  stating  that 
"more  than  half"  the  railroad  securities  represented  no 
real  properties  "or  actual  investments  in  cash"  and  states 
that  the  railroads  of  the  United  States  could  be  constructed 
for  $5,600,000,000.  They  possibly  could  "be  constructed 
for  this  sum,  but  the  land  and  depot  buildings  now  owned 
by  the  railroads  of  this  country  are  worth  as  much  as  the 
sum  named  by  the  unknown  Professor  and  his  estimate 
becomes  as  worthless  as  the  estimate  obtained  by  "alge- 
braic formula  checked  by  logarithmic  application." 

When  it  is  known  that  the  engines  and  cars  alone  rep- 
resent an  investment  of  about  $1,750,000,000  the  figures 
of  the  Professor  appear  ridiculous. 

The  reconstruction  of  our  railroad  system  which  has 
been  going  on  for  the  past  ten  years  has  caused  an  outlay 
of  one  half  the  sum  he  names. 

I  attach  a  statement  giving  railroad  capitalization  in 
various  countries.  It  explains  itself: 

United  Kingdom $280,000  per  mile 

Belgium 167,898 

France 142,256 


WATERED  STOCK.  101 

Holland $137,103  per  mile 

Austria 111,032 

Switzerland 106,759 

Germany 105,400 

Russia  in  Europe 83,511 

Hungary 64,860 

Denmark 43,381 

Norway 39,439 

Sweden  (State  roads) 44,048 

Canada 61,198 

New  Zealand 45, 400 

Australia  (Standard) 63,200 

Australia  (Narrow  Gague) 37,ooo 

Japan 42,000 

United  States 49,436 


102  SOCIALISM  OR  EMPIRE. 


CHAPTER.  XV. 

STATE  RAILROAD  REGULATION. 

As  railroad  corporations  receive  their  charter  from, 
and  their  corporate  existence  is  the  result  of  state  laws, 
it  is  reasonable  that  most  regulative  laws  should  come  through 
state  legislation;  but  these  laws  should  not  assume  to  dic- 
tate the  price  of  service.  Police  and  sanitary  regulations 
properly  come  under  the  control  of  the  power  which  creates 
the  corporation.  The  laws  governing  crossings,  directing 
that  flagmen  be  employed  and  all  of  the  laws  providing  for 
the  public  safety  are  properly  the  province  of  government. 
The  sanitary  laws  even  down  to  the  foolish  provision  that 
a  spittoon  should  be  placed  under  every  other  seat  in  passen- 
ger cars,  are  well  within  the  province  of  state  law  makers, 
and  there  are  cranks  enough  in  our  state  legislatures  to  think 
of  every  possible  thing,  which  in  their  minds  protects  the 
public  or  annoys  the  corporations. 

On  the  issuance  of  a  charter  the  corporation  is  required 
to  specify  the  objects  of  the  company,  and  the  state  grants 
permission  to  operate  in  accordance  with  the  provisions  of 
the  charter  granted. 

Most  states  provide  that  if  the  company  fails  to  com- 
mence operations  in  a  certain  length  of  time,  that  the  charter 
expires  or  terminates,  and  many  states  oblige  the  operation 
of  a  certain  number  of  trains  per  day  to  keep  the  charter 
alive. 

Several  states  have  by  constitutional  provisions  given 
notice  that  the  state  will  assume  to  name  a  maximum  rate 
if  necessary,  and  to  enforce  laws  against  extortionate  or  un- 
fair tariffs. 

In  the  states  where  this  notice  has  been  given  the  char- 
ters of  the  Companies  plainly  mention  either  that  the  state 
reserves  the  right  to  name  maximum,  or  absolute  rates, 


STATE  RAILROAD  CONTROL.  108 

and  there  can  be  no  controversy  over  regulative  laws  in  those 
states,  because  the  corporation,  tacitly  accepts  a  contract 
admitting  this  right.  In  England  the  charters  provide  for 
this  power  and  it  is  part  of  the  agreement  between  the  gov- 
ernment and  the  corporation,  that  the  Board  of  Trade  shall 
assume  to  name  maximum  rates  not  only  at  the  start  but 
at  any  other  time. 

The  charters  of  the  railways  of  Germany,  France  and 
Switzerland  provide  for  a  governmental  control  and  ultimate 
purchase,  so  that  the  taking  over  by  the  government  of  those 
roads  violates  no  contract  nor  takes  any  man's  property 
by  undue  process. 

In  the  United  States,  Massachusetts  is  the  only  state 
providing  for  state  purchase  of  chartered  railroad  com- 
panies, but  the  power  has  never  been  used. 

Several  states  have  owned  and  operated  railroads  but 
in  every  instance  they  have  ultimately  sold  out  to  private 
corporations,  as  it  is  repugnant  to  our  American  ideas  of 
freedom,  that  the  state  would  oblige  one  portion  of  its  citi- 
zens, not  benefited  by  a  railroad's  construction  to  as- 
sist others  in  such  a  business  venture,  through  payment 
of  tax;  and  nearly  all  of  the  state  ventures  were  a  burden 
on  the  tax  payers. 

It  was  soon  recognized  that  in  case  the  state  would  as- 
sume to  construct  railroads  that  the  protests  and  jealousies 
of  one  section,  would  stop  development  of  another,  and  that 
the  feeling  engendered  through  business  competition  would 
soon  tend  to  destroy  the  integrity  of  a  true  commonwealth, 
and  by  fierce  internal  strife  jeopardize  the  progress  of  the 
state. 

Most  of  the  men  who  talk  about  government  owner- 
ship and  purchase  of  railroads,  and  who  quote  Germany  and 
Switzerland  as  examples,  do  not  appear  to  know  that  it  was 
part  of  the  contract  when  the  roads  were  chartered.  The 
provision  in  France  also  is  part  of  the  contract,  and  in  fact 
the  government  always  has  owned  the  right  of  way. 

Without  such  a  provision  in  a  charter,  even  under  a 
monarchy  or  empire  a  government  would  hesitate  before 
attempting  to  acquire  private  owned  property,  excpt  at  a 
price  perfectly  satisfactory  to  the  owners.  Such  an  outrage 
on  property  rights  could  be  perpretrated  in  Russia  or  in  Switz- 


104  SOCIALISM  OR  EMPIRE. 

erland,  but  not  under  a  constitutional  monarchy.  Such  a 
power  can  only  be  claimed  by  an  absolute  ruler  or  a  social 
tyranny. 

In  regard  to  the  power  of  states  to  regulate  rates  there 
is  such  a  close  connection  between  seizure  of  property  and 
naming  a  price  for  service,  that  one  merges  into  the  other. 

Prior  to  1870  no  state  in  the  Union  provided  in  the 
charters  given  to  railroad  corporations  that  the  state  would 
assume  to  name  a  maximum  or  any  other  rate.  Common 
law  gives  ample  remedy  for  extortion  or  discrimination, 
and  the  state  authorities  could  bring  action  to  correct  the 
same. 

The  agitation  which  brought  the  Farmers'  Alliance  into 
prominence  induced  Florida  to  provide  that  a  maximum 
rate  be  named  by  the  legislature  over  railroads  chartered 
by  the  state. 

The  following  states  have  included  in  railroad  corporation 
charters  the  provision  that  the  legislature  could  reserve  to 
itself  the  right  to  name  a  maximum  rate,  prevent  abuses, 
discriminations,  etc.  by  constitutional  notice,  viz.,  Alabama, 
Georgia,  Illinois,  Michigan,  Mississippi,  Montana,  Nebraska, 
Texas,  Utah,  Washington  and  West  Virginia. 

In  addition  to  these  states  the  following  have  passed 
laws  covering  the  same  ground,  viz.  Maine,  Massachusetts, 
New  Hampshire  and  New  York. 

According  to  the  report  of  the  Interstate  Commerce 
Commission  no  other  states  provide  in  their  incorporation 
laws  for  this  right,  and  without  such  notice  in  the  charter 
there  should  be  no  doubt  in  any  fair  man's  mind,  that  every 
one  of  the  laws  passed  in  the  other  states  than  those  men- 
tioned are  unconstitutional,  as  they  assume  to  take  away 
from  the  owners  of  property  the  most  valuable  portion  of 
his  ownership,  i.  e.  the  power  to  name  a  price  for  its  use  by 
others. 

It  is  evident  that  all  the  Companies  who  received  their 
charters  prior  to  1875  in  the  sixteen  states  named,  or  in  any 
other  state  at  any  time,  are  not  in  a  position  to  admit  that 
the  state  has  such  a  right.  Any  such  vital  point  in  the  con- 
tract if  omitted  from  a  charter  should  not  be  corrected  by 
a  state  changing  the  terms  of  the  agreement  with  the  cor- 
porations after  the  companies  have  expended  ten  thousand 
million  dollars  in  railroad  construction. 


STATE  RAILROAD  CONTROL.  105 

One  of  the  inducements  for  this  expenditure,  was  the 
omission  from  the  charter  of  a  provision  which  would  pass 
the  control  of  the  property  to  others  than  the  rightful  owners. 

At  the  time  when  two-thirds  of  our  railroads  were  being 
built  the  going  rate  of  interest  ruled  from  7  per  cent  to  10 
per  cent  and  millions  of  dollars  used  in  railroad  construction, 
would  have  sought  other  channels,  if  states  had  assumed 
to  dictate  rates,  or  assume  that  a  rate  of  4  per  cent  or  even 
10  per  cent  was  the  limit  to  earning  capacity  for  the  capital 
invested. 

Having  omitted  this  provision  in  the  charter  granted 
and  having  done  so  with  the  evident  intent  of  inducing  capi- 
tal to  invest,  it  is  such  a  plain  attempt  at  blackmail,  now  to 
attempt  to  exert  this  power,  that  the  advocates  for  state  regu- 
lation of  rates  should  feel  as  though  they  were  in  bad  company. 

The  sixteen  states  where  since  1875,  constitutional  pro- 
visions or  statutes  provide  for  such  powers  over  rates  in  the 
charters  granted,  evidently  have  attempted  to  follow  the 
English  idea  of  control  and  in  most  of  them  "Commissions" 
or  "Boards"  or  "Agencies"  are  delegated  the  power  to  en- 
force the  provisions. 

It  always  has  been  remarkable  to  me  that  the  railroads 
have  not  succeeded  in  evading  all  of  this  form  of  interference, 
as  the  framers  of  the  laws  in  every  instance  appear  to  have 
forgotten,  that  we  were  living  in  a  free  country,  under  a 
written  constitution,  which  completely  separates  the  functions 
of  the  Legislative,  Executive  and  Judicial  Departments, 
and  in  every  instance,  the  Legislature  has  attempted  to  dele- 
gate to  these  executive  boards,  commissions  or  agencies, 
part  of  their  Legislative  functions. 

Instead  of  making  the  maximum  rate  themselves,  they 
have  attempted  to  delegate  the  authority  to  some  one  else, 
and  this  is  clearly  beyond  their  power.  In  England  the 
Executive  department  is  higher  than  the  Legislative  or 
Judicial  and  an  Executive  Board  can  act,  using  "discretion- 
ary" power,  while  'in  this  country  it  is  against  the  princi- 
ples of  our  government  that  an  executive  should  go  further 
than  to  execute  the  law.  The  safety  of  our  Republican  form 
of  government  depends  on  this  fact,  and  our  forefathers 
felt  that  one  of  the  greatest  dangers  which  we  would  meet 
was  when  some  executive  would  assume  to  use  discre- 
tionary power  in  government. 


106  SOCIALISM  OR  EMPIRE. 

If  the  people  want  a  "responsible"  government,  a  mon- 
archy or  an  empire,  these  powers  can  be  properly  assumed 
by  Boards,  Commissions  or  Agencies  of  the  Executive  Depart- 
ment, but  certainly  not  under  our  present  form  of  government. 

The  legislature  of  Ohio  when  it  passed  the  law  making 
two  cents  the  legal  fare  over  railroads  in  the  state,  went 
about  this  thing  in  the  right  way,  if  there  is  any  right  way 
to  such  a  thing;  but  when  it  is  known  that  not  a  charter 
granted  to  any  railroad  in  Ohio  specifies  that  the  state  has 
any  such  right,  it  would  appear  that  the  law  was  but  an 
attempt  at  blackmail  and  will  be  obeyed  by  the  railroads 
if  they  can  make  it  pay,  otherwise  not.  If  the  Legislature 
had  passed  a  law  in  conjunction  with  the  two  cent  law,  mak- 
ing it  obligatory  on  the  people  to  travel  enough  to  give  the 
passenger  volume  of  traffic  necessary  to  make  such  a  rate 
pay,  it  would  be  a  fair  law,  but  nevertheless  a  tyranny. 

In  a  controversy  of  this  kind  the  great  mass  of  our  cit- 
izens do  not  want  to  injure  a  great  interest,  and  in  this  at- 
tempt to  enforce  a  two  cent  rate  in  many  states,  the  people 
generally  are  misinformed  regarding  the  facts. 

Forty-five  per  cent  of  the  operating  expenses  of  the 
railroads  of  the  United  States  is  used  in  operating  passenger 
trains,  while  but  27  per  cent  of  the  gross  earnings  is  derived 
from  that  class  of  service. 

The  average  cost  of  operating  a  train  in  the  United 
States  is  $1.31  per  mile  when  each  train's  porportion  of  re- 
pair, station  and  track  service  is  considered,  and  the  aver- 
age number  of  passengers  per  train  in  the  United  States  is 
but  46.  It  can  be  seen  that  a  two  cent  fare  on  all  of  the  roads 
in  the  United  States  would  create  a  serious  loss  in  operation. 
Owing  to  the  high  speed  required,  and  the  better  equipment 
used,  this  average  cost  of  moving  a  train  a  mile  has  increas- 
ed from  93  cents  in  1897  to  $1.31  375-1000  in  1904  while 
the  tendency  of  fares  have  been  toward  a  lower  plane. 

The  passenger  fare  if  figured  at  two  cents  per  mile  would 
amount  to  92  cents  and  there  is  an  additional  20  cents  per 
mile  received  from  mail  and  express  service  but  with  these 
two  items  added  it  can  be  seen  that  a  loss  of  nearly  20  cents 
per  mile  would  be  the  result  of  a  general  two  cent  fare. 

The  people  should  not  be  misled  by  the  action  of  Mon- 
archies or  socialistic  governments,  who  throw  a  "sop"  to  the 
people  in  naming  low  passenger  rates  accompanied  with 


STATE  RAILROAD  CONTROL.  107 

poor  service;  but  who  charge  from  two  to  three  times  as 
much  for  freight  as  is  charged  in  the  United  States,  because 
eight  tons  of  freight  are  moved  for  each  passenger  carried 
in  this  country. 

On  some  of  our  New  England  Roads  where  an  average 
of  62  passengers  per  train  are  carried  and  where  the  cheap 
local  train  service  reduces  the  cost  per  train,  to  as  low  as 
88  cents  per  mile,  a  two  cent  rate  is  a  fair  one,  and  Massa- 
chusetts with  her  370,  Rhode  Island  with  431  and  New  Jer- 
sey with  268  inhabitants  per  square  mile,  can  furnish  the 
passengers  necessary  to  make  such  a  rate  pay.  It  would 
be  ruin  to  the  passenger  service  of  the  roads  of  Kansas  with 
but  1 8,  Colorado  with  5,  or  Wyoming  with  but  one  resident 
per  square  mile  for  legislatures  to  attempt  such  action. 

There  are  but  six  states  with  enough  density  of  popu- 
lation to  warrant  a  profit  in  a  two  cent  fare.  While  Ohio 
is  not  to  be  classed  as  one  of  these  states  it  is  so  near  the 
line  that  its  enforcement  would  be  an  experiment. 

Indiana,  Iowa  and  many  other  states  agitating  this 
question  would  practically  force  a  loss  on  the  railroads  not 
intended  by  the  framers  of  the  constitution. 

The  income  tax,  the  single  tax,  the  regulation  of  rail- 
roads, trusts,  insurance  companies,  etc.,  are  all  benefits  ac- 
cording to  many  minds,  but  not  practical  in  the  United  States 
without  a  change  in  our  form  of  government. 

The  different  states  after  issuing  charters  under  which 
thousands  of  millions  of  dollars  have  been  invested,  with 
no  notice  therein  that  they  intend  to  assume  control  of  the 
earning  capacity  of  the  property  created,  certainly  fail  to 
give  the  private  owners  the  protection  guaranteed  citizens 
of  a  monarchy,  when  they  pass  laws  intending  to  reduce 
the  earning  capacity  of  money  to  a  rate  decided  fair  by  them, 
but  not  satisfactory  to  the  owners  of  the  property  itself. 

It  might  be  reasonably  fair  for  them  to  pass  laws  saying 
that  hereafter  railroads  must  accept  such  control,  but  every 
sane  man  knows  that  this  would  mean  a  complete  cessation 
of  railroad  building  in  the  state  passing  such  a  law.  The 
assumption  that  the  constitutional  provision  giving  congress 
the  power  to  regulate  commerce  between  states  is  only  taking 
advantage  of  words  and  not  following  the  intent  of  the  fram- 
ers of  that  instrument. 

The  commerce  between   states  at   the  time   the   consti- 


108  SOCIALISM  OR  EMPIRE. 

tution  was  framed  was  all  in  private  owned  boats  or  wagons, 
and  the  writers  of  that  sentence  had  no  idea  that  a  rate  of 
fare,  or  price  charged  for  carrying  freight  would  be  named 
by  congress.  It  would  violate  the  most  sacred  principle 
in  our  constitution  which  was  framed  with  the  primary  view 
of  protecting  citizens  in  their  ownership  of  property  and  to 
prevent  government  interference  with  private  incentive. 

This  constitutional  provision  certainly  should  restrain  all 
of  the  states  not  having  specific  contracts  with  railroad  com- 
panies when  charters  were  issued,  from  rate  legislation,  and 
it  is  rather  late  for  them  to  attempt  to  change 
the  provisions  of  a  contract  after  vast  sums  of  money  had 
been  expended  by  the  receivers  of  the  charters. 

But  it  is  evident  that  each  state  upon  assembling 
its  legislature  is  going  to  attempt  to  regulate  railroads  and 
interfere  with  the  earning  capacity  of  the  companies.  Il- 
linois through  her  railroad  commission  ordered  a  20  per  cent 
reduction  on  all  state  freight  traffic.  Illinois  is  one  of  the 
states  which  reserved  to  the  legislature  the  right  to  name  a 
maximum  rate  in  the  later  charters  granted,  and  over  the 
roads  organized  since  that  notice,  the  legislature  could  pos- 
sibly name  a  rate,  but  I  do  not  see  how  it  could  delegate  that 
authority  to  a  commission.  It  is  needless  to  say  that  such 
a  sweeping  reduction  if  enforced  would  seriously  interfere 
with  the  earning  capacity  of  the  corporations  and  would 
be  a  partial  seizure  of  private  property.  The  Kansas  legis- 
lature ordered  reductions  in  Kansas  although  not  a  railroad 
charter  in  the  state  provided  for  such  action.  When  such 
a  law  is  passed  up  to  the  Supreme  court  it  can  hardly  decide 
otherwise  than  that  it  is  an  unconstitutional  infringement  on 
acquired  rights. 

The  most  valuable  privilege  in  a  charter  when  granted, 
is  the  one  allowing  a  charge  for  service,  and  this  charge  for 
the  use  of  property  is  the  primary  value  of  a  railroad  com- 
pany's securities,  and  the  higher  courts  are  obliged  to  recog- 
nize the  reflex  of  earning  capacity  on  values,  as  being  con- 
nected with  property  ownership. 

An  attempted  destruction  of  earning  capacity  thus 
becomes  a  seizure  of  property  which  could  not  be  enforced 
without  payment  of  damages  by  the  state. 

The  agitators  and  socialists  will  naturally  find  fault  with 
such  a  decision  but  it  is  a  fundamental  law  in  the  United  States. 


RESULT  OF  GOVERNMENT  CONTROL.          109 


RESULT  OF  GOVERNMENT  CONTROL. 

In  the  ten  succeeding  chapters  the  result  of  government 
control  of  transportation  is  given  in  all  countries  with  any 
mentionable  amount  of  traffic  except  South  America  and 
Mexico. 

The  fact  that  competition  is  prevented  as  soon  as  gov- 
ernment assumes  to  regulate  rates,  should  be  apparent  to 
all.  In  all  foreign  countries  the  government  regulation 
makes  cheap  freight  service  impossible. 

The  rate  law  in  the  United  States  if  lived  up  to  strictly, 
will  gradually  eliminate  competition  and  if  the  railroad 
managers  join  with  the  Commission  in  an  attempt  to  equal- 
ize rates  as  between  localities,  the  rates  will  of  necessity  be 
higher  than  if  private  competitive  influences  controlled. 

The  true  business  of  an  American  railroad  is  the  trans- 
portation of  our  products  from  the  mines,  farms,  forests  and 
streams,  and  the  low  price  per  unit  charged  has  placed  just 
so  much  more  profit  in  the  hands  of  the  producers  of  wealth. 

It  is  the  direct  reason  for  our  general  prosperity. 

The  succeeding  chapters  show  that  the  interference  of 
government  in  rate  making,  ends  in  higher  charges  for 
service,  and  a  dissatisfaction  among  the  producing  commun- 
ities. 

In  fact  the  government  interference  in  rate  making, 
is  the  direct  cause  of  the  great  immigration  from  Central 
Europe,  and  it  is  a  mistake  for  us  to  follow. 

I  do  not  dilate  on  passenger  rates,  because  the  advance 
charged  in  this  country  is  necessary,  by  reason  of  better  ser- 
vice and  higher  wages,  and  also  from  the  fact  that  the 
population  of  but  five  states  in  the  Union  would  warrant 
low  passenger  fares. 

The  railroads  would  gladly  make  a  one  cent  a  mile  pas- 
senger fare,  if  a  general  advance  in  freight  tariff  was  allowed 
of  but  one  quarter  of  a  cent  a  ton  a  mile.  Such  a  change 


110  SOCIALISM  OR  EMPIRE. 

would  assist  the  rich  man  who  travels,  but  would  take  twice 
as  much  money  from  the  farmer,  miner  or  lumberman 
who  produces. 

By  going  over  the  results,  it  cannot  fail  to  im- 
press upon  the  mind  of  any  student  of  political  economy, 
the  fact  that  it  is  a  mistake  for  any  government  to  enter 
into  the  railroad  business,  and  that  competition  is  a  better 
safeguard  for  the  people's  interest,  than  any  form  of  govern- 
ment control. 


CANADIAN  RAILROADS.  HI 


CHAPTER.  XVI. 

CANADIAN  ROADS. 

Uninformed  people  frequently  refer  to  Canada  as  an 
example  showing  the  success  attending  Government  control 
and  regulation  of  railroads. 

The  agitation  of  this  question  by  our  Inter  State  Com- 
merce Commission  was  with  a  view  of  getting  power  into 
its  hands  more  or  less  of  the  same  character  as  is  given 
the  Department  of  railways  and  canals  in  the  Dominion  of 
Canada. 

About  the  time  that  Congress  convened  in  December 
1905,  a  long  article  was  published  in  the  Railway  World 
from  the  pen  of  Professor  McLean,  a  former  railway  Com- 
missioner for  the  Dominion,  with  the  evident  intent  of  ad- 
vancing the  Commission's  view.  He  gave  the  bright  side  of 
the  Railway  control  argument,  but  failed  to  show  the  impracti- 
cable part  or  the  peculiar  conditions  existing. 

The  Dominion  of  Canada  has  a  more  complete  control 
over  the  Railways  of  the  commonwealth  than  any  other 
semi-representative  government  in  the  world,  except  a  pure- 
ly socialistic  community.  The  railroads  are  as  subservient 
to  the  Executive  Department  of  the  Government  as  though 
owned  by  the  government  itself. 

A  railroad  commission  is  created  as  an  adjunct  to  the 
Executive  Department  with  the  most  extraordinary  powers. 

The  Commission  is  constituted  the  sole  judge  of  facts 
and  its  decision  is  not  amenable  to  the  courts. 

The  construction,  direction  of  route,  improvements  and 
operation,  regulation  of  speed,  etc.,  are  given  over  to  the 
dictation  of  this  Commission. 

It  can  make  and  unmake  tariffs  and  compel  substitu- 
tion of  its  rates  in  place  of  rates  made  by  the  railway 
officials. 

The  only  appeal  is  to  the  Cabinet  (not  the  courts)  so 


112  SOCIALISM  OR  EMPIRE. 

that  the  Executive  Department  is  really  a  dictator  in  railroad 
matters. 

It  is  about  what  the  Inter  State  Commerce  Commission 
would  like  to  have  for  the  United  States,  and  would  be  very 
near  the  condition  desired  by  true  socialism  or  absolute 
monarchy. 

The  Commission  in  Canada  can  abrogate  the  long  and 
short  haul  provisions  at  pleasure;  it  can  allow  compet- 
itive rates  to  be  made  without  notice,  and  for  the  purposes 
of  this  argument  I  am  willing  to  admit  that  the  Dominion 
of  Canada  has  a  Commission  that  can  do  anything  it  wants 
to  with  railroad  management,  except  allow  a  "pool"  under 
their  law.  Further :  that  everything  it  orders  has  to  be  obeyed 
unless  the  Cabinet  says  otherwise. 

The  Professor  only  tells  part  of  the  story,  when  saying 
that  the  power  of  the  Cabinet  "is  the  natural  outcome  of 
responsible  government  existing  in  Canada"  from  the  fact 
that  there  are  more  potent  reasons  than  mere  form  of  gov- 
ernment, which  make  Canada's  position  on  railroad  control 
fairly  reasonable. 

Poor's  Manual  for  1905  shows  that  in  the  Dominion 
of  Canada  there  were  19,610  87-100  miles  of  railroad,  and 
that  all  except  1,680  67-100  miles  had  received  Government 
or  Provincial  assistance,  either  with  land  or  cash  subsidies. 

It  can  thus  be  seen  that  91  per  cent,  of  the  railroads 
have  been  assisted  in  their  construction  by  Government  aid. 

The  railroads  of  the  Dominion  had  cost  up  to  1904  less 
than  twelve  hundred  million  of  dollars. 

There  was  practically  492  million  dollars  of  stock  out- 
standing, and  the  Government  or  Provinces  had  advanced 
$366,698,739  in  cash. 

Then  in  addition  there  had  been  issued  460  million  of 
Bonds,  and  to  back  a  good  portion  of  this  issue,  Land  grants 
amounting  to  about  50,000,000  acres  had  been  given. 

If  the  Government  had  furnished  one-third  of  the  capi- 
tal and  credit  used  in  the  construction  of  the  roads,  and  was 
the  largest  single  party  in  interest,  with  no  representation 
on  the  Board  of  Directors  to  look  after  that  interest,  it  might 
be  a  proper  thing  to  give  an  executive  department  consider- 
able say  in  the  management. 

The  United  States  has  assisted  in  the  construction  of 


CANADIAN  RAILROADS.  113 

several  lines  of  railroad,  and  as  long  as  the  railroad  owed 
the  Government  money,  there  was  a  full  representation  on 
the  Board  of  Directors  of  the  companies  assisted.  Government 
directors  took  active  interest  in  the  control  of  the  property 
and  had  just  as  much  to  do  with  its  management  as  any  other 
largely  interested  stockholder.  As  long  as  the  railroad  owed 
the  Government  these  directors  were  retained,  but  when 
the  Government  had  been  reimbursed,  the  parties  taking  up 
that  interest  assumed  the  places  on  the  Board  of  Directors. 

At  the  present  time  the  only  railroad  owned,  or  partly 
owned  by  our  Government  is  the  Panama  railroad  venture, 
undertaken  by  the  Executive  Department  of  this  Admin- 
istration, and  the  department  is  running  this  venture  in  such 
a  way  that  it  will  be  an  expense  to  our  tax  payers. 

It  is  laughable  to  hear  a  man  quote  Canadian  control  of 
railways  as  an  example  for  this  country  to  follow.  We  ob- 
ject to  paying  more  for  a  short  haul  than  a  long  one,  and 
Canada  allows  it.  We  object  to  private  rates  for  especial 
shipments,  and  Canada  allows  them.  We  want  competition 
between  our  ra  Iroads,  and  Canada  through  its  Commission's 
control  prevents  it,  and  will  not  even  allow  branches  to  be 
built  by  one  road  into  another's  territory  for  purposes  of 
competition. 

Were  it  not  for  the  competition  of  American  lines  driv- 
ing them  to  it,  it  would  take  a  week  to  get  across  the  conti- 
nent by  Canadian  railroads,  and  the  reasonable  tariff  of  the 
Canadian  Pacific  is  only  the  direct  result  of  competition  with 
American  roads. 

Everything  (even  the  much  despised  rebate)  is  going 
on  with  the  Canadian  railroads  that  our  reformers  want 
stopped  by  an  Executive  Commission  in  the  United  States. 

The  fact  is  the  Canadian  Commission  only  looks  after 
the  Government's  interest  as  principal  owner  in  the  railroads, 
instead  of  having  a  commensurate  representation  on  the 
Boards  of  Directors. 

In  1903  the  great  Grand  Trunk  system  did  not  have  a 
Director  on  its  Board  outside  of  England,  and  the  Canadian 
Government  had  advanced  over  $15,000,000  to  the  main  sys- 
stem  of  that  railroad,  and  $10,000,000  more  to  the  tributary 
lines,  and  without  an  extraordinary  power  being  given  to 
a  commission,  these  vast  holdings  would  have  no  representa- 


114  SOCIALISM  OR  EMPIRE. 

tion  in  the  control  of  the  road  whatever,  although  it  repre- 
sented a  great  portion  of  the  cost  of  construction. 

When  the  Canadian  railroad  investments  are  examined, 
the  full  beauties  (?)  of  government  owned  and  controlled 
railroads  are  shown  It  is  positively  laughable  to  see  what 
funny  things  have  been  done  to  the  Canadian  Government 
through  railroad  graft. 

The  Dominion  of  Canada  own  outright  1,520  miles  of 
railroad  for  which  they  have  paid  $72,735,938. 

In  1902,  one  of  the  most  favorable  years  for  their  oper- 
ation, this  investment  only  earned  over  operating  expenses 
$57,890.89,  while  in  1904  a  positive  loss  from  operation  was 
made  of  $1,002,055.00.  These  roads  have  not  paid  a  dollar's 
interest  on  the  investment,  or  a  cent  of  tax  to  the  Province 
or  Government.  The  Government  furnishes  transportation 
to  a  community  at  less  than  cost  and  collects  from  other 
localities  enough  to  make  up  the  deficiency. 

If  baggage  is  lost  or  your  leg  is  broken,  it  is  your  mis- 
fortune; you  cannot  sue  the  Government. 

These  government  roads  furnish  a  good  many  fa'r  jobs 
to  friends  of  the  administration ;  but  in  case  of  dissatisf acton, 
to  strike  would  create  a  breach  of  contract  with  the  Gov- 
ernment, and  to  prevent  others  from  working  would  be  re- 
bellion. There  are  2,100  miles  of  railroad  in  addition  to  the 
foregoing  purely  owned  government  roads,  in  which  the 
Dominion  and  Provinces  have  advanced  more  money  than 
the  capital  stock  of  the  companies  represent.  In  one  case 
a  $5,000  capital  succeeded  in  getting  $833,770  out  of  the 
Government,  and  in  several  instances  the  cost  of  construction 
does  not  equal  the  Government  advances. 

A  close  inspection  of  the  way  the  public  money  of  the 
Dominion  has  been  used  for  personal  ends,  would  make  the 
ordinary  Amer'can  grafter  look  like  ''thirty  cents  " 

None  of  the  foregoing  matters  were  discussed  by  the 
learned  Professor,  because  it  would  tend  to  show  that  the 
Canadian  Commission  had  possibly  been  composed  of  about 
the  same  class  of  business  men  as  are  placed  on  our  Inter 
State  Commerce  Commission. 

Fine  old  men  with  honest  intentions,  but  a  complete  lack 
of  understanding  of  business  affairs. 

His  reference  to  the  natural  result    of    form  of  govern- 


CANADIAN  RAILROADS.  115 

ment"  was  pertinent,  and  after  investigation  only  proves 
what  I  have  been  endeavoring  to  show  regarding  the  great 
change  demanded  in  the  laws  proposed  in  this  country. 

Remember  that  the  Dominion  of  Canada  is  part  of  a 
monarchy. 

It's -prime  ruler  is  a  King.  He  is  represented  in  Canada 
by  an  appointee  and  this  appointee  recommends  a  Cabinet. 
This  becomes  the  responsible  body  in  governing  the  people. 
The  Railway  and  Canals  Commission  of  the  Dominion  is  but 
a  representative  of  the  King,  through  the  succession  named. 

The  good  people  of  Canada  can  vote  subsidies  to  roads 
and  give  them  of  the  public  domain,  but  the  ''responsible 
government"  looks  after  it  after  the  action  has  been  taken. 

Through  the  line  of  succession  of  power  described  the 
Commission  can  override  the  Courts,  the  railroads  and  even 
the  will  of  the  people. 

The  Executive  Department  of  a  monarchy  retains  this 
right,  and  a  Parliament  can  alter  the  constitution  itself. 

It  is  exact  y  the  form  of  Government  that  we  fought  to 
get  rid  of,  through  the  war  of  the  Revolution.  It  was  the 
revolt  against  this  power  which  created  our  free  and  independ- 
ent Nation.  In  our  constitution  we  provided  for  trials  be- 
fore a  jury.  We  protected  our  people  in  their  ownership 
of  property  and  intended  to  restrain  our  Execut  ve  Depart- 
ment from  doing  nearly  all  the  things  the  Canadian  Commis- 
sion is  allowed  to  do.  We  intended  that  private  enterprise 
should  carry  on  every  business  project,  and  naturally  the 
railroad  business  should  be  handled  the  same  as  any  other; 
competition  will  regulate  the  value  of  service. 

The  railroads  of  the  United  States  are  a  success,  while 
those  of  Canada,  with  the  exception  of  the  Canadian  Pacific, 
and  some  sections  operated  in  conjunction  with  American 
roads,  are  failures  financially. 

We  get  better  service  and  cheaper  rates  through  compe- 
tition than  Canada  secures  through  government  regulation. 
Our  railroads  pay  $65,000,000  tax  to  the  states  and  com- 
munities, while  the  people  of  Canada  are  taxed  to  support 
the  railroads. 

If  the  same  rate  of  tax  was  charged  against  the  Canadian 
railroads  as  is  paid  in  the  Uuited  States,  their  twelve  hundred 
millions  of  railroad  property  would  earn  less  than  2  per  cent 


116  SOCIALISM  OR  EMPIRE. 

on  the  money  cost  of  the  roads,  and  this  pittance  would  go 
to  the  bond  holders  in  Europe  and  not  to  the  Dominion  of 
Canada. 

There  is  nothing  connected  with  the  management  of 
Canadian  railroads  that  could  be  adopted  with  profit  to  the 
citizens  of  the  United  States,  unless  it  was  to  pay  a  subsidy 
to  our  trans-pacific  lines  of  steamships  and  enable  them  to 
meet  that  form  of  competition  on  equal  grounds. 

I  have  heard  many  men  declare  when  told  of  the  im- 
practicability of  delegating  such  power  to  a  Commission  in 
this  country,  that  they  did  not  know  but  what  the  forms 
of  Government  adopted  by  a  monarchy  were  better  than 
ours,  because  it  had  this  initiative  power  of  control  over  capi- 
tal. 

"The  gates  of  Castle  Garden  swing  out  as  well  as  in  "and 
there  are  many  monarchies  and  empires  and  but  one  United 
States,  and  men  of  that  line  of  thought  have  my  permission 
to  go  and  enjoy  themselves.  I  for  one  prefer  the  idea  of 
government  as  laid  down  by  the  framers  of  our  constitution, 
and  to  feel  that  I  have  a  right  guaranteed  me  in  regard  to  con- 
trol of  my  private  property  that  cannot  be  changed  by  the 
whim  of  an  executive  or  trhe  vagaries  of  "reform"  elements 
in  Congress. 

Canada  has'the  right  of  free  speech  and  free  press,  through 
sufferance  of  their  executive ;  but  they  have  not  the  "freedom" 
of  control  over  private  property  that  we  possess;  and  which 
has  enabled  us  to  prosper  as  no  nation  has  prospered  in  history. 


ENGLISH  RAILWAYS.  117 


CHAPTER  XVII. 

ENGLISH  ROADS. 

The  development  and  operation  of  the  railroad  systems 
of  the  United  Kingdom  and  the  United  States,  has  been 
along  such  divergent  lines  as  to  make  direct  comparison 
difficult 

A  good  deal  of  the  argument  in  favor  of  a  Commission 
having  regulative  control  in  this  country,  is  from  the  fact  that 
the  Board  of  Trade  always  has  had  that  power  in  England 
to  a  more  of  less  extent  and  no  roads  are  owned  by  the  gov- 
ernment in  the  kingdom. 

The  Board  of  Trade  for  many  years  before  railroads 
were  operated,  had  a  general  supervisory  power  over  the 
commerce  of  England. 

It  requested  regulative  and  corrective  laws  in  regard 
to  shipping  and  Parliament  usually  granted  its  request. 
The  President  of  the  Board  of  Trade  is  a  Cabinet  officer  and 
part  of  the  executive  staff.  When  canals  were  constructed 
the  Board  of  Trade  regulated  and  published  the  tolls  to  be 
charged.  There  was  an  idea  in  England  in  the  early  days 
of  railway  construction  that  they  were  only  public  iron  ways 
subject  to  use  by  private  parties,  through  payment  of  tolls, 
as  on  the  canals ;  and  many  heavy  shippers  up  to  a  few  years 
ago  owned  their  own  cars  and  kept  them  in  repair.  With 
this  idea  in  view  when  the  first  charters  were  given  a  maxi- 
mum rate  of  tolls  was  specified  in  the  charter  and  the  Board 
of  Trade  furnished  the  figures. 

However,  it  soon  developed  that  the  complications 
occasioned  by  handl:ng  traffic  in  such  a  way,  would  cause 
confusion  and  uncertainty,  and  the  railroad  soon  furnished 
the  power  and  made  the  rate  to  cover  transportation  as  well 
as  tolls.  Englishmen  are  hard  to  change,  and  the  Board  of 
Trade  still  names  a  maximum  rate  in  England,  but  the  rate 


118  SOCIALISM  OR  EMPIRE. 

is  so  much  higher  than  we  charge  in  this  country,  that  it 
appears  ridiculous  to  an  American  transportation  man. 

Then  again  the  railroads  of  the  United  Kingdom  were 
constructed  between  well  known  centers  of  trade,  whose 
possibilities  in  producing  tonnage  could  to  a  certain  extent 
be  determined,  while  three-fourths  of  the  railroads  of  the 
United  States  were  a  speculative  construction,  gambling  on 
the  future  prosperity  of  the  country  traversed.  The  interest 
of  the  railroad  in  England  was  to  get  as  much  out  of  the  traf- 
fic as  it  would  stand,  while  in  the  United  States  it  was  in  the 
interest  of  the  railroads  to  offer  cheap  service  and  "build 
up"  their  territory. 

The  discovery  that  "volume  of  traffic"  had  more  to  do 
with  cheapening  "units"  of  transportation  than  anyone  single 
thing,  brought  in  great  systems  in  this  country,  which  reach 
this  way  and  that  with  branches  to  bring  trade  to  the  parent 
stem,  and  create  the  volume  necessary  to  enable  them  to 
charge  low  cost  per  unit  from  points  in  competition  with 
other  lines.  This  competition  is  so  fierce  as  to  furnish  most 
of  the  argument  on  the  part  of  railroad  men  and  others,  in 
favor  of  a  pooling  system.  I  cannot  see  but  what  this  com- 
petition is  an  advantage  to  the  public,  as  I  have  explained 
in  another  chapter.  The  great  volume  of  low  priced  traffic 
enables  the  residents  along  the  line  to  receive  cheaper  and 
better  service  themselves. 

The  duties  of  the  Board  of  Trade  in  England  naturally 
have  grown  with  the  increase  of  railroad  transportation, 
and  for  years  it  made  an  attempt  to  cover  the  regulative 
control  through  general  laws,  and  from  1881  to  1893  com- 
mittees worked  faithfully  with  that  end  in  veiw,  and  the 
consensus  of  their  views  resulted  in  a  general  classification, 
and  a  system  of  maximum  rates  for  different  lines ;  but  the 
Board  of  Trade  since  the  passage  of  that  law  has  made  a  long 
list  of  exceptions,  even  under  the  varying  rates  prescribed. 
The  present  maximum  rate  in  the  United  Kingdom  aver- 
ages about  as  follows  on  the  greater  lines: 

First  Next  Next  Balance  of 

Classes  20  miles  30  miles  50  miles  Distance 

A.  2.30  i. 80  .90  .80 

B.  2.80  2 . 10  i. 60  i . 10 

C.  3 .60  3-oo  2.40  1.40 


ENGLISH  RAILWAYS.  119 

First  Next  Next  Balance  of 

Classes  ao  miles  30  miles  50  miles  Distance 

1.  4-40  3-7°  2.80  2. 

2.  5.30  4.60  3.60  3. 

3.  6.20  5.30  4.0  3.60 

4.  7-20  6.30  5.  4.40 

5-  8-6°  7-40  6.50  5. 

The  foregoing  statement  covers  the  rate  per  ton  per 
mile  in  cents  charged  the  different  classes  and  it  will  be  seen 
that  with  the  usual  "set"  way  of  the  Englishmen  the  class 
rule  is  reversed  from  ours,  or  any  other  classification  in  use. 
Some  of  the  great  lines  running  north  from  London  have  a 
slightly  lower  maximum  on  some  of  the  classes  and  those 
south  of  London  have  materially  higher. 

Constructive  mileage  is  allowed  the  Severn  tunnel  and 
Forth  Bridge,  and  there  are  exceptions  in  several  other  in- 
stances to  cover  peculiarly  expensive  sections,  etc.,  but  the 
maximum  is  a  ''rate  per  mile,"  the  only  practical  way  of 
regulating  by  law  the  traffic  of  a  railroad  company. 

The  exceptions  granted  by  the  Board  of  Trade  have  at 
times  been  ludicrous — some  of  the  roads  would  have  gone 
out  of  business  with  even  the  extraordinary  maximum  al- 
lowed, without  special  changes  covering  the  situation.  The 
Liskeard  and  Caridon  railroad  is  allowed  to  charge  6  cents 
per  ton  per  mile  on  heavy  traffic,  while  the  maximum  on 
confectionary  is  only  51-3  cents,  but  if  the  road  don't  get 
the  6  cents  per  ton  on  the  metal  carried,  it  would  go  out  of 
business  entirely,  and  the  customers  depending  on  the  road 
for  transportation  demanded  the  change.  The  Board  of 
Trade  changed  the  low  class  maximum  but  allowed  the  high- 
er classes  to  remain  unchanged.  The  Board  of  Trade  do  not 
consider  the  long  and  short  haul  provision  as  of  importance; 
they  recognize  the  necessity  of  low  rates  from  competing 
points,  even  though  towns  along  the  line  pay  fifty  per  cent 
higher  rates  for  a  less  distance  to  the  same  market.  Prof. 
Ackworth  tersely  expresses  the  English  idea  of  this  form  of 
apparent  discrimination  when  he  says:  "To  call  upon  a 
railway  company  to  give  an  inland  town  rates  on  the  same 
scale  as  those  it  gives  where  there  is  sea  competition,  simply 
because  it  there  gives  them,  is  to  call  upon  it,  not  to  main- 


120  SOCIALISM  OR  EMPIRE. 

tain  equality  but  to  counteract  inequality,  for  which  not 
the  railway  company,  but  the  Author  of  the  Universe  is  re- 
sponsible." 

The  necessity  of  special  rates  is  recognized  in  England 
and  exceptions  made  in  many  instances  where  an  industry 
can  be  assisted  by  especial  accommodation. 

In  nearly  all  of  the  special  rates  granted  by  the  author- 
ity of  the  Board  of  Trade  a  specified  amount  of  tonnage  is 
named.  When  the  Birmingham  corporation  constructed 
their  reservoirs  and  aqueduct  a  special  rate  was  made  on 
cement  and  pipes  outside  of  the  tariff  provisions,  and  can- 
celled upon  completion  of  the  work. 

The  Board  of  Trade  has  always  recognized  the  wholesale 
right  of  sale  of  transportation  by  railroads,  and  recognizes 
that  a  rate  on  ten  cars  per  day  should  be  lower  than  on  one. 

It  can  be  seen  that  a  good  many  things  are  allowed  in 
the  United  Kingdom  that  would  be  unlawful  in  the  United 
States,  and  that  if  it  is  desired  by  the  American  people  to 
follow  the  English  style  of  government  control,  we  would 
have  to  change  about  all  of  our  laws  relating  to  the  subject. 

The  regulative  control  of  maximum  rates  exercised  in 
England  has  been  one  of  the  main  reasons  for  the  excessive- 
ly high  tariff s. 

Of  course  where  it  has  cost  an  average  of  $280,000  per 
mile  to  construct  the  roads  as  in  the  United  Kingdom,  a 
greater  charge  is  necessary  than  in  the  United  States  where 
the  average  is  about  $50,000,  to  pay  the  interest  charges; 
but  the  main  thing  which  has  prevented  English  railroad 
managers  from  entering  into  competitive  ventures  and  keep- 
ing abreast  of  the  new  era  in  railroad  manipulation  of  trans- 
portation, is  the  fact  that  in  1893  the  maximum  settled  upon 
was  about  the  going  tariffs,  and  the  argument  used  in  giving 
the  Board  of  Trade  the  power  to  promulgate  the  maximum 
rates  selected,  was  that  the  rate  proposed  was  onlv  about 
what  had  been  charged  before.  The  railroad  men  natur- 
ally are  very  careful  about  giving  low  rates  for  fear  an- 
other 'maximum"  would  soon  develop. 

Prof.  Ackworth  gives  the  position  quite  clearly  when 
he  says:  "The  legislation  of  the  years  1891  to  1894  has  done 
much  to  prevent  any  natural  and  gradual  lowering  of  rates. 
A  railway  is  still  free  to  lower.  It  has  ceased  to  be  free  to 


ENGLISH  RAILWAYS.  121 

raise.  A  manager  may  desire  to  lower  a  rate,  hoping  thereby 
not  only  to  benefit  trade,  but  also  by  largely  increasing  the 
volume  of  traffic  to  increase  his  own  net  earnings.  But  it  is 
only  a  hope.  In  the  nature  of  the  case  certainty  is  not  at- 
tainable in  advance.  A  prudent  manager  therefore  will  not, 
unless  his  hope  is  closely  allied  to  certainty,  lower  a  rate, 
when  he  must  face  a  law  suit  before  he  can  put  it  up  again." 

This  is  an  Englishman's  criticism  and  the  reason  why  the 
roads  of  the  United  Kingdom  charge  so  high  a  tariff.  It 
sounds  like  human  nature.  The  result  is  that  the  Board  of 
Trade  resolves  itself  into  an  arbitration  court  sitting  on  quar- 
rels among  neighborhoods,  and  losing  sight  of  the  greater 
questions  concerning  the  public  good.  In  fact  the  office  of 
President  of  the  Board  of  Trade  is  a  sinecure  farmed  out  to 
favorites,  the  last  President  being  notorious  through  his  abili- 
ty to  crochet,  embroider  and  use  a  needle  as  deftly  as  a  woman, 
rather  than  for  any  business  ability. 

In  fact  Professor  Hadley  rightly  describes  the  ultimate 
duties  of  a  regulative  government  board  on  transportation 
matters  when  he  says:  "They  are  not  occupied  with  the  ques- 
tion how  to  lower  rates,  but  how  to  keep  the  right  proportion 
between  existing  rates."  The  result  has  been  that  freight 
rates  in  the  United  States  have  been  lowered  18  per  cent 
since  1892,  while  those  in  England  stand  steady. 

It  has  prevented  that  natural  competition  between  roads 
which  would  benefit  the  public,  and  there  is  not  a  single  fea- 
ture in  railroad  control  as  exhibited  in  England,  but  what 
would  injure  the  business  of  transportation  in  the  United 
States  and  lose  money  for  the  "people." 

It  took  a  couple  of  years  to  formulate  the  revised  tariffs 
on  Englands  22,600  miles  of  railroad,  and  several  years  more 
for  their  business  interests  to  grow  accustomed  to  the  slight 
changes  made  in  1893,  and  now  the  most  able  economists 
of  that  country  say  it  was  a  mistake. 

How  much  worse  it  would  be  for  such  interference  in 
the  United  States  with  ten  times  the  length  of  railroads 
and  three  times  the  tonnage  transported!  The  states  of 
Illinois  and  Iowa  alone  have  as  many  miles  of  railroad  as 
the  United  Kingdom. 

While  the  English  railroads  do  not  publish  their  sta- 
tistics, so  that  the  "unit"  cost  can  be  determined  definitely, 


122  SOCIALISM  OR  EMPIRE. 

averages  have  been  obtained  by  theoretical  systems  quite 
satisfactory,  so  that  the  London  "Statist"  assumes  that  the 
average  haul  per  mile  of  passengers  is  7.8  and  24.86  miles 
for  a  ton  of  freight;  with  those  figures  used  as  a  basis  it  is 
found  that  the  average  revenue  per  passenger  in  England  is 
1.54  cents  per  mile,  and  the  revenue  per  ton  per  mile  for 
freight  is  2  47  cents,  as  against  1.96  cents  per  mile  per  passen- 
per  and  0.76  cents  per  ton  per  mile  for  freight  in  the  United 
States. 

As  an  example  of  the  results  of  operation  I  have  devel- 
oped a  line  of  comparison  on  three  sections  of  road  of  about 
the  same  length,  one  in  England  and  two  in  the  United  States. 
I  have  selected  the  London  &  Northwestern  in  England  which 
owns  one-tenth  of  all  the  rai1  roads  of  the  United  Kingdom 
and  carries  about  one-tenth  of  all  the  passengers  and  freight 
transported  and  whose  accounts  are  intelligible  to  an  American. 

The  figures  on  that  road  are  for  the  year  1901. 

For  the  purpose  of  comparing  a  similar  system  in  the 
United  States,  I  take  the  N.  Y.,  N.  H.  &  Hartford  Railroad 
from  Poor's  Manua1  for  1903.  This  road  gives  the  same 
class  of  service  in  the  United  States  as  English  roads  are 
expected  to  give.  Its  traffic  is  between  definite  centers, 
but  through  local  demands  has  no  great  volume  of  traffic 
flowing  along  well  defined  lines.  (The  percentage  of  mineral 
hauled  over  this  road  is  estimated.) 

The  other  comparison  is  the  Pennsylvania  Railroad  proper, 
in  Pennsylvania,  where  the  traffic  is  well  in  hand  and  by 
favorable  rates  is  thrown  on  definite  lines  in  large  quanti- 
ties; taken  from  their  official  report  for  1903  in  my  office: 

A  COMPARATIVE  STATEMENT. 


p 

Miles  operated  

London  &        New  York,  New  Haven     Pennsylvania 
forth-  Western             &  Hartford                    Railroad 

i,937                    2,037                    i,772 
$36,840,340       $21,018,284       $56,822,690 
42,723,084        17,145,313        81,835,102 
71.25            50.                67. 

28.75                 50-                       33- 
21,285,217            6,395,676           18,797,000 
,538,030,024    1,444,544,216    10,156,387,883 

Gross  earnings  from  j 
freight   ) 

Total  tonnage  freight 

Percentage  minerals. 
Percentage  other      j 
merchandise  .  .  .  .  j 
Total  freight  train  j 
mileage  1 

Total    tons  freight  | 
carried  i  mile  .  .  .  | 

ENGLISH  RAILWAYS.  123 

London  &         New  York,  New  Haven     Pennsylvania 
North- Western  &  Hartford  Railroad 

540- 
124. 

•559 
•377 
.182 

104,399 

I2>  775, 972 
10,458,871 

26,759,575 
613,291,968 

59 
23 
2.08 

i-54 
•54 
2,511 

65  4% 
72,886,738 

In  this  statement  the  earnings  per  ton  per  mile  on  freight 
carried  by  the  London  &  Northwestern  includes  delivery 
charges  for  certain  classes  of  high  class  freight,  so  that  the 
net  rate  per  ton  per  mile  for  the  same  class  of  service  as  is 
given  in  the  United  States  should  be  2.15  cents. 

It  may  surprise  most  readers  to  know  that  the  rate 
charged  for  passengers  on  this  great  English  system  aver- 
ages a  little  higher  than  the  N.  Y.,  N.  H.  &  H.  R.  R.  in  the 
United  States;  but  it  is  a  fact  brought  about  through  the 
proportion  of  higher  class  passengers  traveling  on  long  dis- 
tance trains  on  the  English  road. 

The  average  charge  per  passenger  in  England  is   1.54 


Average  train  load  | 
tons  j 

72.25 

226  . 

Average  miles  one  1 
ton  carried  f 

36. 

84. 

Earnings  per  ton      j 

per  mile,  cents  .  .  J 

2-37 

i-45 

Expenses  per  ton      j 
per  mile,  cents  .  .  j 

1.49 

i  .04 

Net  earnings  per      j 
ton  per  mile,  cts  .  | 

.88 

.41 

Number  of  freight  | 
cars  1 

77,5i2 

J3,535 

Gross  earnings,  pas-  | 
sengers  f 

$23,354,570 

17,866,425 

Passenger  train 
mileage  ) 

26,657,263 

14,687,835 

Passengers  carried  .  . 

81,512,290 

58,838,131 

Total  passengers       | 
earned  i  mile  .  .  .  ) 

1,222,684,350 

1,024,201,252 

Average  number  of  j 
pas'gers  per  train  j 

46 

62 

Average  number  of  1 
miles  per  pass'ger  j 

15 

18.80 

Av.earn'gs  per  pas-  | 

T       8 

1*7  A 

senger  per  mi.,  cts  ) 

1   .  O 

•  74 

Av.  exp.  per  passen-  ] 
ger  per  mile,  cts  .  ( 

1.134 

1.27 

Av.  net  earnings  per  j 
pass,  per  mile,  cts  J 

.666 

•47 

Number  of  locomo-  | 

tives  I 

3,012 

942 

Percentage  of  oper-  ) 
ating  expense  .  .  .  f 

63% 

71-8% 

Total  earnings    

67,492,236 

43,521,087 

124  SOCIALISM  OR  EMPIRE. 

cents  per  mile,  but  this  includes  so  much  travel  that  we  carry 
in  electric  suburban  service,  at  a  cost  of  less  than  one  cent 
a  mile,  as  to  make  the  general  comparison  useless  unless  we 
include  the  same  in  our  estimate.  It  will  be  noticed  that 
the  profit  per  passenger  is  less  in  this  country  than  in  Eng- 
land, and  the  difference  is  represented  in  higher  pay  to  la- 
borers, and  more  expensive  equipment.  As  the  maximum 
rate  is  4  cents  per  mile  on  first  class  passengers  it  can  be  seen 
that  competition  regulates  the  rate  on  this  English  road  more 
effectively  than  government  control. 

A  comparison  of  the  results' of  freight  transportation  is 
more  instructive. 

It  is  shown  that  the  average  rate  per  ton  per  mile  on 
the  English  road  is  2.37  cents;  on  the  American  road  without 
volume  of  traffic  1.45  cents  and  on  the  Pennsylvania  rail- 
road 0.559  cents.  It  also  shows  that  it  cost  the  English 
road  1.49  cents  to  haul  the  freight  while  the  New  Haven  road 
paid  1.04  cents  and  the  Pennsylvania  railroad  but  0.377 
cents  per  ton  per  mile. 

It  can  be  easily  seen  that  a  good  part  of  the  difference 
in  cost  is  brought  about  by  the  fact  that  a  ton  of  freight  only 
averages  36  miles  haul  on  the  English  railroad,  while  on  the 
New  Haven  it  is  84  and  on  the  Pennsylvania  124  miles,  and 
that  the  train  loads  of  72,  226  and  540  tons  respectively  are 
occasioned,  First:  by  larger  tonnage  from  through  traffic  and, 
Second :  through  the  superior  equipment  in  the  United  States. 
As  an  example  of  the  importance  of  the  length  of  haul, 
the  New  York  Central,  where  the  average  length  of  haul  runs 
up  to  1 80  miles,  can  carry  freight  nearly  as  cheaply  as  the  Penn- 
sylvania Railroad,  although  averaging  but  387  tons  per  train. 
Note  the  importance  of  continuous  haul  in  large  train 
loads  as  an  element  of  cheap  transportation,  and  that  in  this 
country  the  "scattering"  of  traffic  on  the  New  Haven  road, 
even  with  superior  equipment  obliges  that  company  to  pay 
nearly  three  times  as  much  for  operating  expenses  as  the 
Pennsylvania  railroad. 

But  the  important  point  gained  by  this  comparison  is 
that  a  regulation  of  rates  such  as  the  Board  of  Trade  in  Eng- 
land follows,  would  not  affect  the  great  railroad  systems  of 
the  United  States  at  all,  and  that  if  a  commission  now  assumes 


ENGLISH    RAILWAYS.  125 

to  declare  a  maximum  based  on  present  rates  in  the  United 
States,  then  farewell  to  decreasing  freight  charges  in  this 
country. 

Furthermore,  if  failure  of  crops  or  panic  comes  to  in- 
terfere with  the  great  flow  of  interstate  commerce  now  en- 
joyed, a  maximum  rate  based  on  present  charges  would 
ruin  one  half  of  the  companies  in  the  Union. 

England's  regulation  of  rates  furnishes  no  lesson  for  us 
to  follow  and  only  calls  attention  to  the  dangers  attending 
an  attempted  regulation  of  business  affairs  by  law,  even  when 
numerous  exceptions  are  allowed  to  cover  different  conditions. 


126  SOCIALISM  OR  EMPIRE. 


CHAPTER  XVIII. 

FRENCH  RAILROADS. 

Were  it  not  for  the  fact  that  France  has  the  third  largest 
mileage  of  railroads  on  the  continent,  it  would  be  a  waste 
of  time  to  explain  her  system  of  rate  regulation.  The  power 
to  regulate  railroad  rates  is  supposed  to  rest  entirely  in  the 
executive  department  of  France. 

The  Minister  of  Railways  is  supposed  to  have  the  power 
to  act,  but  when  a  change  is  asked  for,  the  forms  and  cere- 
monies required,  bring  forcibly  to  mind  the  French  cartoons 
of  Alphonse  and  Gaston.  The  shipper  or  the  railroad  re- 
quests that  a  change  in  rates  be  allowed.  The  Minister  of 
Railways  instead  of  acting  says  to  the  prefect  of  the  depart- 
ment where  the  change  is  desired  "You  first  Alphonse,"  but 
he  in  turn  refers  it  to  the  local  chamber  of  commerce  and 
commercial  bodies  of  the  locality,  saying  "No!  no!  Gaston, 
it  is  you  must  speak,"  and  after  notice  is  published  for  thirty 
days,  and  investigations  made  by  railroad  inspectors  and 
the  engineers  of  the  Canal  system,  a  decision  is  given  pos- 
sibly that  the  provisional  rate  would  be  allowed,  subject 
to  the  approval  of  the  Minister  who  started  the  unwinding 
of  red  tape  originally. 

It  usually  ends  in  some  canal  boat  captain  or  civil  engineer 
saying  that  things  have  been  going  on  for  twenty  years  with- 
out such  changes  being  necessary,  and  that  it  might  not  do 
to  allow  the  rate. 

But  before  this  government  nonsense  has  culminated  in 
a  direct  refusal  the  shipper  or  the  railroad  would  have  for- 
gotten the  incident  or  made  other  arrangements. 

It  has  been  found  harder  to  change  the  rate  than  the 
location  of  the  factory  in  most  instances. 

The   French   railroad   system   consists   of   28,102    miles 


FRENCH  RAILROADS.  127 

of  road,  in  which  corporations  have  an  interest  in  all  but  1,726 
miles  owned  by  the  government  (taken  through  bankruptcy 
of  the  companies) . 

The  railroads  of  France  were  planned  in  the  time  of 
the  Empire  with  a  view  of  connecting  all  parts  of  the  nation 
with  Paris,  and  were  a  part  of  a  central  military  system. 
Planned  by  the  government  without  much  regard  to  busi- 
ness conditions,  great  difficulty  was  encountered  in  securing 
private  capital  to  construct  them,  some  being  planned  along 
such  evidently  unprofitable  lines. 

The  government  assisted  the  corporations,  and  made 
the  assistance  usually  through  purchase  of  the  right  of  way, 
the  companies  building  the  superstructure  thereon. 
So  that  in  most  instances  the  corporations  merely  own  the 
tracks,  buildings  and  equipment,  and  the  government  fur- 
nishes the  ground. 

It  was  intended  at  the  start  that  the  government  should 
purchase  the  superstructure  at  the  end  of  fifty  years,  but 
that  time  has  been  extended  to  a  ninety-nine  year  term  and 
it  is  doubtful  even  with  the  great  wealth  of  France,  if  that 
nation  will  ever  feel  rich  enough  to  own  the  roads. 

Through  guarantees  of  interest  to  private  investors 
and  subsidies  voted  by  the  government  to  keep  the  roads 
in  operation,  peculiar  conditions  have  developed.  For  in- 
stance the  "railroad  of  the  west"  owes  the  government  $67,- 
400,000  while  the  total  value  of  the  property  of  the  corpora- 
tion is  less  than  $68,000,000.  The  "railroad  of  the  south" 
owes  the  government  $49,000,000  and  only  owns  $45,800,000 
of  property.  The.  government  annually  pays  out  $18,500,000 
guaranteed  interest,  and  the  railroads  are  behind  1,000,000,- 
ooo  francs  in  their  payment  to  the  government,  and  the  peo- 
ple appear  to  be  satisfied  that  it  is  no  worse. 

The  railroads  now  represent  a  value  of  about  $142,250 
per  mile,  if  the  government  interest  is  counted  at  par,  but 
their  actual  value  is  an  enigma.  The  government  being 
part  owner,  and  assuming  to  make  the  rates,  has  placed  it- 
self in  such  a  position  that  the  corporations  play  a  safe  game 
of  "heads  I  win  and  tails  you  lose."  The  courts  recognize  that 
the  government  has  taken  away  the  stockholders  only  way 
of  protection,  so  the  stockholder  receives  his  interest  and  the 
government  makes  the  rate  and  "holds  the  bag." 


128  SOCIALISM  OR  EMPIRE. 

The  government  having  a  direct  interest  in  the  Canal 
system  of  the  country  does  not  allow  the  railroads  to  make 
a  rate  less  than  20  per  cent  higher  than  those  charged  on 
the  canals  and  rivers,  and  as  they  necessarily  have  to  divide 
traffic  with  them,  it  is  impossible  to  create  the  volume  of 
traffic  necessary  to  assure  a  low  rate  per  unit. 

The  result  is  that  the  average  rate  per  ton  per  mile  is 
1.33  cents  in  France,  while  it  averages  but  0.76  cents  in  the 
United  States. 

The  government  control  of  rate  making  in  France  is 
simple  nonsense,  certainly  not  business  and  offers  citizens 
of  the  United  States  no  practical  suggestions  to  follow. 

Since  the  Empire,  which  created  most  of  the  railroad 
system  of  France,  has  passed  away  the  government  to  a  cer- 
tain extent  represents  the  people,  and  it  is  entirely  proper 
for  the  government  to  make  the  rates  if  the  people  stand 
the  losses  incurred. 

No  arrangement  of  this  kind  would  be  satisfactory  in 
the  United  States,  even  if  it  were  constitutional. 

While  the  internal  political  economy  of  France  offers 
many  valuable  suggestions  it  does  not  improve  on  our  system 
of  transportation  and  rate  making. 

In  France  as  in  Germany  the  government  has  such  a 
great  interest  in  the  canals  that  it  prevents  railroad  compe- 
tition, and  as  the  railroads  of  France  were  constructed  with 
the  definite  intention  that  they  should  not  compete  with 
each  other,  the  internal  commerce  of  France  never  has  re- 
ceived the  benefit  derived  from  private  incentive.  They 
are  used  to  it  and  we  in  this  country  are  not,  and  don't  want 
competition  prevented  either  by  law  or  through  pools. 

The  effect  of  governmental  rate  making  in  France  as 
in  Germany,  is  to  throw  the  great  freight  traffic  of  the  coun- 
try on  the  canals  and  rivers. 

While  the  freight  traffic  of  the  roads  has  increased  in 
the  last  twenty  years,  the  canals  and  rivers  although  but 
7,700  miles  in  length,  as  against  the  railroads  28,102,  have 
increased  their  proportion  of  tonnage  carried  from  17  per 
cent  to  over  25  per  cent  in  that  term  of  years. 

The  political  objects  in  government  rate  making  in 
France  are  nearly  opposite  to  those  of  Germany.  The  Ger- 
man idea  is  to  decentralize  traffic  and  prevent  the  growth 
of  large  cities,  while  in  France  the  whole  desire  appears  to  be  to 


FRENCH  RAILROADS.  129 

bring  things  into,  and  out  of  Paris,  but  through  the  destruc- 
tion  of   all   competition,    the   latter  movement   is  lethargic. 

The  French  government  at  all  times  has  attempted  to 
make  Paris  the  ideal  spot,  and  rates  are  made  with  this  ob- 
ject in  view,  so  that  there  are  some  low  rates  given  on  coal, 
coke  and  building  material  down  to  within  the  20  per  cent 
understood  limit  over  canal  rates.  The  French  government 
in  constructing  tariff  uses  the  mileage  base  (the  only  one 
practical  for  government  purposes)  but  with  the  French  idea 
of  exactness  they  divide  the  lengths  into  smaller  sections 
than  in  England.  One  rate  per  ton  per  mile  is  charged  for 
freight  going  15.6  miles,  then  46.8,  156.2,  187.5  and  so  on, 
but  the  lowest  regular  tariff  rate  is  twice  per  kilometer  what 
we  pay  for  miles  in  the  United  States. 

Many  special  rates  are  also  made  by  the  French  govern- 
ment. If  wheat  is  high  the  rates  are  cut  and  the  freight 
tariffs  are  used  as  an  equalizer  or  supporter  of  the  tariff  im- 
posed on  products. 

The  government  is  not  hampered  through  sectional 
differences  as  is  experienced  in  Germany,  and  were  it  not  for 
the  protests  of  those  interested  in  water  transportation 
many  changes  would  have  been  made.  All  Frenchmen 
are  willing  that  Paris  should  get  the  best  and  the  cheapest, 
and  were  it  not  for  this  unwritten  law  that  railroads  must 
charge  20  per  cent  more  than  the  canals,  the  railroad  of  the 
north  in  France  (the  greatest  system)  would  long  ago  have 
driven  the  300  ton  canal  boats  out  of  service. 

But  the  French  government  has  such  a  large  investment 
in  canals  that  it  is  placed  in  the  same  position  that  Germany 
finds  herself,  i.  e.,  that  they  cannot  use  their  railroads  in  up 
to  date  methods  of  transportation  because  if  competition 
was  allowed,  either  the  canal  or  the  railroad  would  suffer 
and  as  a  natural  result  the  "people"  have  to  pay  the  freight. 

It  can  be  seen  that  the  high  charge  for  transportation 
is  directly  the  result  of  government  interference  in  business 
transactions  in  both  Germany  and  France,  and  that  although 
they  charge  nearly  twice  as  much  freight  as  we  do,  they  have 
nearly  reached  the  limit  to  which  they  could  go  in  cheapen- 
ing transportation,  while  all  transportation  men  in  this  coun- 
try know  and  expect  to  greatly  reduce  transportation  charges 
in  the  United  States.  But  let  the  law  step  in  and  politi- 


130  SOCIALISM  OR  EMPIRE. 

cians  demand  that  this  locality  or  that,  be  given  the  same 
privileges  as  the  centers  of  trade  now  receive  and  have  a 
political  board  say  what  the  maximum  charge  shall  be  on 
the  traffic;  it  would  be  a  matter  of  business,  for  railroads 
not  to  experiment  in  low  transportation  or  reduce  tariffs 
for  fear  of  "new  maximums"  being  developed  and  new  du- 
ties imposed  that  would  ruin  their  property  as  an  investment. 

Following  along  the  lines  of  control  in  France,  Germany 
and  Austria  some  "reformer"  has  introduced  in  the  rate  bill 
a  provision  that  the  Inter  State  Commerce  Commission 
should  take  charge  of  water  and  rail  transportation  when 
through  rates  are  made,  evidently  not  knowing  that  this 
would  be  impracticable  in  the  United  States  while  proper 
in  the  countries  named. 

If  we  should  follow  French  precedent  in  this  matter, 
the  Inter  State  Commerce  Commission  could  be  called  upon 
by  the  steamboat  men  of  the  Ohio  and  Mississippi  Rivers, 
with  a  demand  that  railroad  rates  be  advanced  so  that  the 
boats  could  make  a  profit.  The  state  of  New  York  after 
squandering  her  $100,000,000  on  the  Erie  canal  could  demand 
that  the  railroads  be  called  upon  to  advance  tariffs  so  as 
to  make  their  venture  pay.  As  the  commission,  under  the 
constitution,  if  they  do  anything  with  rate  making,  must 
see  that  the  ports  of  one  state  receive  the  same  treatment 
as  another,  the  authority  itself  complicates  any  action  they 
might  take. 

Competing  private  interests  are  warranted  in  forcing 
an  advantage  to  a  point  which  would  destroy  some  forms  of 
competition.  Our  railroads  have  about  finished  up  the  canals, 
and  our  river  transportation  is  confined  to  very  low  class 
traffic  through  their  competition,  but  a  government  board  would 
be  sadly  out  of  place  if  it  had  power  over  both  lines  of 
traffic  to  make  rates  on  one  which  would  destroy  the  other. 

In  justice  to  themselves  and  in  accordance  with  the 
intent  of  the  framers  of  the  constitution,  in  case  of  such  a 
protest  being  made,  a  raise  of  rates  would  naturally  be  or- 
dered as  is  done  in  France  and  all  other  countries  where 
government  retains  an  initiative  power  over  rate  making. 
However,  the  "people"  of  the  United  States  would  pay  an 
increased  tariff  just  as  they  do  in  France  and  Germany. 


GERMAN  RAILWAYS.  131 


CHAPTER  XIX. 

GERMAN  RAILWAYS. 

There  are  peculiar  conditions  connected  with  the  rate 
making  power  by  government  in  Germany  not  existing  in 
any  other  country.  In  Germany  the  railroads  are  used 
openly  as  a  political  factor,  and  military  adjunct. 

The  first  charter  laws  passed  in  Germany  provided  for 
government  ownership  after  a  term  of  years.  Since  1879 
it  has  been  the  policy  of  the  German  government  and  states 
to  own  their  railway  lines. 

The  corporations  were  bought  out  under  a  form  or  rail- 
road valuation,  based  as  a  general  thing  upon  a  capitalization 
of  net  earnings. 

A  term  of  five  years  was  used  to  equalize  the  earning 
capacity,  and  twenty-five  times  that  amount  of  3^ 
or  4  per  cent  government  bonds  exchanged  for 
the  property  in  lieu  of  the  corporation  securities;  the 
companies  dividing  the  bonds  under  agreements  made  be- 
tween holders  of  the  different  issues.  While  this  was  not 
the  only  factor  considered;  as  future  earning  capacity,  cost 
of  construction  and  many  other  things  were  considered  in 
the  purchase  of  different  sections  of  road,  it  was  the  base  of 
all  negotiations. 

However,  the  stockholders  of  railway  shares  in  Germany 
soon  recognized  that  it  was  better  to  sell  to  the  government 
after  it  had  secured  the  larger  lines,  because  their  property 
would  be  isolated  and  earning  capacity  destroyed  by  gov- 
ernment influences. 

At  the  present  time  the  government  and  the  states  own 
all  but  2,815  of  the  33,819  miles  of  railroad  in  the  Empire, 
and  have  paid  an  average  of  $105,400  per  mile,  and  in  a  short 
time  should  own  the  entire  mileage. 

When  the   Prussian  Diet  agreed  to  the  purchase,   and 


132  SOCIALISM  OR  EMPIRE. 

when  the  other  Principalities  joined  in  nationalizing  the 
railway  system  several  promises  were  made  on  the  part  of 
the  government,  which  have  not  been  lived  up  to  at  any 
time,  and  it  appears  that  this  is  a  case  where  an  executive 
departmental  power  has  been  created  not  subject  to  control 
after  its  creation. 

The  government  had  assured  the  Diet  that  beyond  a 
reasonable  sinking  fund  and  payment  of  interest  the  rail- 
roads were  not  to  be  made  a  source  of  income.  The  suppos- 
ition was  that  if  any  profit  was  derived,  it  would  be  retained 
as  a  surplus  fund  to  cover  the  "lean"  }^ears,  or  in  time  wipe 
out  the  indebtedness  created  through  purchase  of  $3,457,000,- 
ooo  of  property  and  that  successive  years  of  profit  would 
result  in  reduction  of  rates  in  the  interest  of  the  people. 
The  "people"  have  received  slight  consideration  since  the 
government  secured  control. 

The  roads  are  profitable,  as  most  of  them  are  operated 
in  populous  sections,  and  with  labor  paid  less  than  one-third 
the  amount  received  by  railway  employees  in  the  United 
States.  At  times  of  late  years  as  high  as  7  16-100  per  cent 
has  been  earned,  but  after  payment  of  the  interest  on  rail- 
road bonded  debt  and  reserving  on  an  average  one-half  of 
one  per  cent  sinking  fund,  the  balance  has  been  used  for  gov- 
ernment purposes.  The  equipment  has  been  allowed  to 
deteriorate  to  such  an  extent  as  to  place  the  railroads  of 
Germany  today,  about  where  those  of  the  United  States 
were  in  1892  as  transportation  factors. 

A  progressive  railroad  man  in  the  United  States  would 
throw  three-quarters  of  the  German  freight  equipment  into 
the  scrap  heap,  as  a  measure  toward  future  economy  in  oper- 
ation. 

With  all  of  the  great  progress  made  by  Germany  in  the 
last  ten  years,  industrially,  which  should  naturally  have 
cheapened  railroad  per  unit  charges,  the  rate  per  ton  per 
mile  which  was  1.32  cents  in  1892  is  1.253  i*1  I9°3  while  in 
the  United  States  the  rates  have  decreased  18  per  cent  in 
the  same  time,  averaging  but  0.76  cents  the  last  few  years. 

The  business  men  of  Germany  fully  understand  that 
the  Crown  uses  the  railroads  for  profit.  In  fact  the  ministry 
has  several  times  refused  to  lower  rates  because  it  said  the 
government  "needed  the  money." 


GERMAN  RAILWAYS.  133 

While  the  politicians  of  Germany  (except  the  socialist 
wing)  vehemently  deny  the  assertion,  it  is  a  fact  that  the 
government  uses  the  rate  making  power  as  a  political  lever 
to  pry  this  or  that  feature  through  the  legislative  department. 

The  rates  are  made  with  a  view  of  assisting  the  protect- 
ive tariff  demanded  by  the  German  producers,  and  also  as  a 
form  of  protection  from  competition  of  one  section  of  the 
Empire  against  another. 

Local  jealousies  of  states  are  recognized  by  the  govern- 
ment and  within  the  German  Empire  there  is  an  antagonism 
of  state  against  state  which  extends  to  business  as  well  as 
politics.  This  antagonism  is  fostered  by  the  central  gov- 
ernment, as  it  causes  the  several  states  naturally  to  look  to 
the  Emperor  for  protection  not  only  from  the  outside, 
but  from  each  other. 

The  local  jealousies  at  times  become  ludicrous.  To  an 
American  the  incident  at  Leipsic  when  the  Saxons  push 
the  through  car  by  hand  over  to  the  Prussian  rails,  and  it 
is  then  taken  in  hand  by  a  crowd  of  Prussian  "pushers "be- 
cause the  engines  of  one  state  are  not  supposed  to  transgress 
on  the  rails  of  another,  is  a  comical  incident  in  European 
travel. 

In  the  United  States  the  protests  of  passengers  over  such 
"horse  play"  would  oblige  competing  or  warring  railroads  to 
transfer  with  power  and  save  needless  delay. 

Protest  of  passengers  in  Germany  however  receives 
slight  consideration,  and  it  soon  dawns  on  the  mind  of  trav- 
elers when  confronted  with  the  overbearing  tyranny  of 
the  government  understrapper  at  the  stations,  that  there 
is  a  material  difference  in  putting  yourself  under  orders  on 
a  government  road  and  buying  respectful  service  from  a 
private  corporation. 

In  Germany  a  shipper  of  freight  who  expresses  discon- 
tent is  informed  that  the  government  is  doing  all  it  can  for 
him,  and  if  he  would  chance  to  damn  the  situation  would 
be  subject  to  "Les  Majesty." 

By  playing  the  interest  of  one  section  against  another 
through  favors  shown  or  withheld,  nearly  anything  the  gov- 
ernment desires  is  "log  rolled"  through  the  legislative  de- 
partment. 

The  Emperor  uses  the  railroad  system  of  Germany  for 


134  SOCIALISM  OR  EMPIRE. 

three  well  defined  objects  of  importance,  in  the  order  named. 

First.  As  a  military  necessity  through  which  he  controls 
all  transportation  in  times  of  war  or  internal  disorders. 

Second.  As  apolitical  lever  to  bring  recalcitrant  poli- 
ticans  or  sections  of  the  Empire  to  subjection. 

Third.     To  make  money. 

Of  course  there  should  be  some  feature  presented  about 
the  "people"  having  some  rights  or  benefits  from  the  tran- 
saction but  a  study  of  German  railroad  methods,  and  their 
objects  in  rate  regulation,  do  not  develop  where  they  come 
in.  If  the  people  are  dissatisfied  they  can  ship  on  the  canal. 

The  rate  making  power  is  exerted  in  Germany  with  the 
purpose  of  decentralizing  traffic,  and  instead  of  developing 
transportation  lines  with  a  view  of  maintaining  sufficient 
volume  of  traffic  to  warrant  a  cheap  charge  per  unit,  the 
policy  has  been  to  scatter  the  volume  of  traffic  and  confine 
it  to  local  sections. 

In  fact  the  government,  when  the  permission  to  pur- 
chase was  asked  of  the  Prussian  Diet,  stated  that  it  would 
among  other  things  "attempt  to  decentralize  industry  and 
check  the  growth  of  large  cities."  The  result  is  that  the 
average  haul  per  ton  is  72  miles  in  Germany,  while  in  the 
New  England  states  under  the  same  practical  conditions 
it  is  86,  and  in  some  of  our  "groups"  arranged  by  the  Inter 
State  Commerce  Commission,  the  distance  runs  up  to  220 
and  225  miles  in  the  United  States.  It  readily  explains 
why  the  charge  per  unit  of  transportation  cannot  be  lowered. 
In  the  New  England  states  on  account  of  the  short  haul  per 
ton  and  the  scattered  traffic,  the  charge  per  ton  per  mile 
is  1.167  cents  the  highest  of  any  group  in  the  United  States, 
and  the  use  of  improved  equipment  about  offsets  the  re- 
markably low  wages  paid  in  Germany. 

In  Germany  while  the  rate  per  ton  per  mile  is  figured 
at  1.253  cents,  when  the  gross  freight  revenue  is  considered 
the  result  is  1.44,  owing  to  some  terminal  collections  not 
figured  in  the  other  estimate. 

Such  revenue  while  it  would  materially  increase  the 
apparent  charge  per  ton  per  mile,  in  many  cases  secured 
additional  service  over  what  railroads  give  in  the  United 
States,  so  I  use  the  smaller  amount  in  comparison. 

The  fact  is  the  German  railroads  are  reduced  to  the 


GERMAN  RAILWAYS.  135 

position  of  mere  "feeders"  to  the  canal  and  river  systems  of 
Germany,  and  the  waterways  carry  the  bulk  of  the  freight 
of  the  empire. 

The  proportion  carried  by  the  canals  and  rivers  is  in- 
creasing each  year,  and  the  government  is  still  constructing 
canals  to  further  decentralize  traffic. 

The  present  average  charge  on  the  waterways  of  Ger- 
many is  0.346  cents  per  ton  per  mile.  The  size  of  boats  vary 
from  100  tons  on  the  smaller  canals  to  as  high  as  2,000  tons 
on  the  Rhine,  although  the  average  of  600  tons  prevails  on 
the  river.  The  great  industrial  development  of  Germany 
has  been  possible  only  through  cheapened  service  on  her 
waterways;  the  railroads  have  had  but  little  to  do  in  the 
great  advances  made. 

The  government  does  not  allow  the  roads  to  overcome 
geographical  location  by  constructing  lines  of  traffic,  and 
thereby  cheapen  transportation,  as  it  is  against  their  public 
policy. 

The  railroads  in  the  United  States  pay  but  little  atten- 
tion to  canal  competition.  The  Erie  canal  with  its  240  ton 
boats  sees  a  decline  in  tonnage  each  year,  and  as  the  rate 
frequently  is  made  as  low  as  5^  cents  per  bushel  on  wheat 
from  the  lakes  to  the  seaboard  by  the  railroads,  it  can  be 
seen  that  the  railroads  of  this  country  would  soon  drive  a 
canal  out  of  business  which  charged  0.346  cents  per  ton  per 
mile;  because  they  give  quicker  service  at  less  cost. 

In  the  month  of  September,  1905,  out  of  a  total  grain 
receipts  (flour  to  grain)  at  New  York  of  11,292,943  bushels, 
but  1,532,975  passed  through  the  canal  and  there  were  3,- 
883,503  bushels  carried  by  the  railroads  between  the  lakes 
and  New  York  in  direct  competition  with  the  canal. 

In  Germany  this  competition  would  not  be  allowed. 
Mr.  Von  Miquel  the  German  Minister  of  Finance  plainly  in- 
formed the  people  that  the  government  would  not  lower 
freight  rates  on  the  railroads  to  compensate  localities  of  one 
section,  when  other  sections  received  benefits  through  canal 
construction,  nor  would  he  allow  such  low  rates  on  the  canal 
as  to  impair  the  profit  making  power  of  the  railroad.  Thus 
competition  is  stifled  and  all  new  industries  are  forced  to 
locate  along  some  waterway. 

Mr.   Jencke,   one  of  the  executive  heads  of  Krupp  & 


136  SOCIALISM  OR  EMPIRE. 

Co.,  who  had  been  long  in  railroad  service,  in  a  public  ad- 
dress in  1896  said,  "that  if  the  railways  had  remained  in  the 
hands  of  corporations  they  would  have  quelled  in  its  infancy 
the  agitation  for  canals  by  lowering  their  charges  to  the  pre- 
sumptive canal  rates." 

The  government  through  need  of  money  and  this  decen- 
tralization of  traffic,  having  made  it  impossible  for  German 
roads  to  reduce  tariffs,  has  used  the  rate  making  power  only 
to  serve  local  conditions.  Special  rates  are  given  beet  sugar 
for  export;  the  rate  on  imported  foods  is  maintained  by  the 
railroad,  because  the  minister  of  finance  naively  puts  it  that 
he  "does  not  want  the  railroad  rate  to  counteract  the  duty 
imposed." 

The  rate  making  power  is  avowedly  used  as  a  secondary 
protective  tariff  on  imports  and  an  open  "rebater"  and  bounty 
giver  to  exports. 

The  German  government  while  publishing  a  rate  per 
mile  tariff,  finds  that  to  do  business  it  is  necessary  to  make 
exceptions  and  on  these  government  owned  railroads,  run 
with  an  avowed  purpose  of  localizing  railroad  traffic,  63  per 
cent  of  the  freight  moved  is  on  special  rates  given. 

To  aid  the  coal  interests  progressive  rebates  are  given 
to  producers  who  compete  with  English  or  French  coal. 

The  rates  are  made  on  "train  load"  shipments  of  from 
200  to  300  tons,  giving  large  shippers  a  material  advantage 
over  car  load  shippers,  and  in  case  of  rebates,  the  limit  of 
tonnage  runs  into  the  thousands.  Thus  the  coal  shippers 
of  the  Ruhr  district  receive  a  rebate  of  14  cents  a  ton,  if  they 
ship  not  less  than  75,000  tons  to  Paris  in  a  year.  In  Ger- 
many the  wholesale  selling  of  railroad  transportation  is 
recognized  in  its  system  of  special  rates  and  rebate  allowances. 

This  is  a  natural  result  when  railroads  are  only  adjuncts 
to  waterways;  the  "reformer"  in  the  United  States  who 
demands  that  the  little  shipper  be  given  the  same  rates  as 
the  large  one,  fails  to  understand  that  he  asks  for  a  change 
in  economics  not  recognized  in  any  other  country.  When- 
ever water  transportation  is  used  the  large  shipper  has  a 
tremendous  advantage  through  being  able  to  fill  the  largest 
boats  and  receive  the  cheapest  service,  and  in  time  they  crush 
out  the  smaller  competitor  because  of  this  advantage,  and 
in  Germany  the  railroads  recognize  that  the  large  shipper 
should  receive  a  lower  rate. 


GERMAN  RAILWAYS.  137 

Of  course  the  government  makes  the  rate  alike  to  all, 
but  the  conditions  prohibit  the  small  shipper  from  receiving 
the  benefit  of  the  lower  special  rates.  The  government  has 
stopped  all  secret  rates  and  offers  as  low  rates  as  were  given 
shippers  by  the  corporations  but  it  obliges  the  shipper  to  do 
certain  other  things. 

Since  the  government  has  had  the  rate  making  power 
in  Germany,  the  only  consideration  given  the  "people"  has 
been  to  advance  rates,  and  prevent  one  section  from  inter- 
fering or  selling  in  other  territory  than  its  own. 

The  three  iron  districts  in  Germany  are  all  given  cheap 
export  rates,  but  the  tariff  is  nearly  prohibitory  if  they  should 
attempt  to  invade  each  others'  territory.  The  grain  growers 
of  eastern  Prussia  can  ship  their  grain  to  Sweden  and  Norway, 
and  receive  a  bounty  of  35  marks  per  metric  ton,  but  the 
railroad  rate  absolutely  prohibits  them  from  sending  their 
wheat  to  Rhenish  Prussia  (their  greatest  industrial  center) 
because  the  grain  growers  near  that  district  demand  that 
the  government  do  not  use  the  railroads  for  the  purpose  of 
destroying  their  natural  geographical  market.  They  do  not 
furnish  grain  enough  themselves,  and  the  remarkable  busi- 
ness (?)  anomaly  is  presented  of  Prussia  paying  a  bounty 
on  wheat  exports  from  eastern  Prussia,  and  collecting  a  tariff 
on  nearly  ten  times  as  much  wheat  imported  into  the  iron 
districts  of  the  Rhine. 

For  the  past  twenty  years  every  attempt  of  the  govern- 
ment to  increase  railroad  traffic  by  reducing  rates  on  Rus- 
sian, Austrian  or  foreign  products,  has  been  met  with  a  storm 
of  protest  from  local  interests  in  Germany,  and  the  only  lower 
rates  that  have  been  allowed  are  on  things  for  export.  Po- 
litical economists  in  Geimany  estimate  that  the  wheat  of 
that  country  can  only  stand  an  average  of  125  miles  haul, 
at  the  rates  made  by  the  government,  while  it  is  a  well  known 
fact  that  the  grain  of  the  United  States  averages  1,000  miles 
haul  by  railroad  before  placed  in  ships  for  export. 


138  SOCIALISM  OR  EMPIRE. 


CHAPTER  XX. 

GERMAN  RAILWAYS. 

It  can  be  seen  that  the  principles  which  govern  German 
rate  making  and  those  in  the  United  States  are  antipodal. 

One  is  the  direct  result  attained  by  governmental  regu- 
lation and  control  of  the  rate  making  power;  the  other  of 
competition  between  corporate  interests. 

The  German  government  tries  to  and  our  government 
must  (if  the  power  is  granted)  do  exact  justice  to  each  sec- 
tion of  the  country.  In  fact  the  provisions  of  our  constitu- 
tion are  so  explicit  on  this  matter  that  the  United  States 
would  be  held  closer  to  a  hard  and  fast  rule  than  the  German 
Emperor.  Germany  makes  her  rates  at  so  much  per  mile 
with  a  terminal  charge.  While  our  railroads  make  rates  to 
meet  business  requirements. 

On  "inter  state  "  commerce  (or  sections  if  you  please) 
in  Germany  the  low  class  goods  are  charged  a  terminal  charge, 
then  0.9  cents  per  ton  per  mile  for  the  first  62.5  miles  and 
then  about  0.76  cents  per  ton  per  mile  and  it  is  not  desired 
or  expected  that  you  ship  much  further  than  225  miles  at 
that  rate. 

It  is  not  public  policy  in  Germany  to  have  one  section 
or  state  in  the  nation  attempt  to  equalize  values  through 
competition  with  other  states;  and  it  is  "politics"  for  the 
government  to  pretend  at  least  to  retain  geographical  ad- 
vantages to  certain  localities. 

There  are  a  few  lower  exceptional  rates  than  the  ones 
named,  but  they  are  given  on  export  products  to  "boost" 
the  manufacturing  or  the  beet  sugar  interests,  and  would 
make  the  "reformers"  in  the  United  States  throw  several 
successive  fits,  if  attempted  in  this  country  by  the  government. 

To  keep  the  farmers  quiet  the  German  government  gives 
them  the  lowest  rate  published  on  a  calcium  salts  used  in 


GERMAN  RAILWAYS.  139 

the  manufacture  of  manure,  and  it  just  meets  the  average 
rate  per  ton  per  mile  charged  by  the  canals.  The  German 
farmer  pays  nearly  five  times  as  much  freight  on  his  wheat 
as  on  his  salts  for  manure,  and  the  low  rate  on  manure  stuff 
is  about  all  the  consideration  he  gets  from  the  government 
owned  railroads  of  Germany. 

The  lowest  German  rates  on  coal  for  German  use  would 
raise  the  price  of  soft  coal  $1.25  per  ton  all  along  our  eastern 
sea  coast,  and  drive  all  of  the  Southern  Pacific  coast  trade 
in  coal  to  Australia.  The  lowest  German  rates  on  wheat 
would  raise  the  rates  on  export  grain  25  per  cent  between 
Chicago  and  New  York,  and  her  internal  grain  rate  would 
limit  the  mills  of  Minneapolis  to  a  wheat  acreage  contained 
within  a  circle  of  about  125  miles. 

The  lowest  rate  between  the  Lakes  and  seaboard  would 
be  9.8  cents  per  bushel  as  against  5^  at  present  charged. 
The  German  idea  of  economics  would  be  to  have  the  traffic 
go  on  the  canal  anyway. 

If  the  people  of  the  United  States  propose  to  have  the 
government  regulate  and  control  railway  rates,  the  rate 
making  power  must  recognize  the  claims  of  one  locality 
against  another,  and  decide  what  a  just  and  reasonable  rate 
would  be  for  the  whole  people.  It  brings  the  American  peo- 
ple down  to  a  decision,  as  to  whether  they  want  to  decen- 
tralize traffic  and  population,  and  prevent  the  growth  of 
cities,  as  is  the  avowed  purpose  in  Germany,  or  whether 
they  desire  our  present  methods  of  railroad  transportation 
to  continue.  In  Germany  the  length  of  haul  is  the  material 
factor,  and  the  quantity  a  consideration.  In  the  United 
States  quantity  of  traffic  is  the  material  factor,  and  length 
of  haul  a  consideration. 

A  mileage  rate  by  law  will  obliterate  our  great  through 
transportation  systems  by  railroad  and  revive  our  waterways. 

It  would  destroy  such  places  as  Indianapolis  and  Colum- 
bus, Denver  and  Nashville  and  build  up  towns  like  Cairo  and 
Paduca  and  Memphis. 

The  people  can  divide  on  this  question  with  as  much 
honesty  of  purpose  as  they  divide  on  tariff  matters.  Our 
system  nationalizes  traffic,  the  German  localizes  it.  I  have 
explained  this  feature  to  several  men  and  found  one  who 
thinks  it  better  to  make  the  set  rate  per  mile  and  localize 


140  SOCIALISM  OR  EMPIRE. 

the  traffic  thereby,  claiming  it  was  wrong  for  our  railroad 
system  to  so  arrange  tariffs  as  to  enable  California  to  com- 
pete with  Florida  up  to  her  very  boundaries,  and  deliver 
the  pine  lumber  of  Oregon  along  the  edge  of  the  lumber  for- 
ests of  Michigan. 

He  was  one  of  those  staunch  old  Democrats  who  doubt 
the  ad  visibility  of  new  f  angled  things. 

He  felt  it  an  outrage  that  the  beautiful,  palatial  river 
steamer  should  be  replaced  by  screaming,  noisy  trains.  He 
thinks  it  wrong  that  those  hundreds  of  towns  brought  into 
being  through  locations  of  natural  beauty  or  local  resources, 
along  our  great  rivers  and  canals,  should  sleep  in  peace, 
while  "junctions"  have  become  busy  centers,  and  great 
cities  built  up  in  swamps. 

This  man  even  if  he  knew  that  the  decentralization  of 
traffic,  and  that  any  rate  which  could  possibly  be  named 
per  mile,  would  bring  a  revolution  in  our  economics,  could 
look  on  with  complacency;  but  when  I  told  him  that  the 
Democrats  of  the  House  had  voted  for  a  national  rate  con- 
trol and  that  a  Democratic  Senator  was  floor  manager  for 
the  bill  before  the  Senate,  he  said  that  "times  were  out  of 
joint"  when  men  claiming  to  be  Democrats  advocated  placing 
any  such  power  in  the  hands  of  an  executive.  It  overrides 
every  principle  of  state  rights,  although  the  state  had  given 
the  companies  their  charters;  it  places  control  in  the  hands 
of  the  government,  which  cannot  help  but  interfere  with 
private  citizens'  ownership  of  property,  and  this  Democrat 
joined  me  in  saying  that  the  agitation  was  not  Democracy 
or  Republicanism,  but  the  rankest  socialism  or  a  veiled  at- 
tempt to  build  up  autocratic  power  as  in  Germany. 

Germany  does  not  furnish  any  object  lesson  which  we 
should  follow  in  rate  regulation.  The  progressive  business 
men  know  that  our  private  control  of  rate  making  power 
left  free  to  act,  is  more  safe  than  any  power  placed  in  gov- 
ernment hands.  Private  control  of  rates  gives  elasticity 
and  adaptability  to  varying  conditions ;  Germany's  govern- 
ment control  does  not.  The  farmer  in  the  United  States 
living  in  Nebraska  or  Dakota  competes  with  the  farmer  in 
Oregon  and  New  York  on  nearly  equal  terms;  in  Germany 
his  market  is  limited  to  about  125  miles  of  territory. 

Nine-tenths  of  our  farm  products  are  eaten  by  our  in- 


GERMAN  RAILWAYS.  141 

dustrial  population,  and  if  the  rate  making  power  destroys 
our  long  distance  handling  of  products  of  mines,  and  suc- 
ceeds in  scattering  our  industrial  centers  and  prevents  growth 
of  great  cities  (the  avowed  purpose  of  the  German  roads) 
the  great  decline  of  farm  values  will  commence. 

In  Germany  as  in  the  United  States  the  great  bulk  of 
railroad  traffic  is  the  product  of  mines  (not  farms). 

In  1903  while  agriculture  furnished  9.56  per  cent  of  the 
railroad  traffic,  animals  2.63  per  cent,  forests  11.56  percent 
and  manufactures  14.39  per  cent  the  mines  furnished  51.56 
per  cent  or  over  one-half  of  all  tonnage  hauled  by  the  rail- 
roads in  the  United  States,  and  the  tonnage  of  the  Great  Lakes 
at  times  credits  85  per  cent  to  the  mining  industry,  it 
can  be  seen  that  the  iron,  coal  and  other  mineral  products 
carried  at  prices  which  could  not  be  properly  regulated  by 
a  rate  per  ton  per  mile,  ordered  by  the  government,  would  be 
the  main  industries  to  suffer. 

In  1879  a  German  government  commission  reported 
officially  that  the  United  States  could  never  compete  with 
Germany  in  the  manufacture  of  iron,  because  the  fluxing 
properties  and  ore  were  at  such  great  distance  from  the  coal 
that  the  cost  of  bringing  them  together  would  prevent  cheap 
production. 

They  counted  not  on  the  aggressive  ability  of  our  trans- 
portation companies,  and  today,  the  ores  of  Michigan  and 
Wisconsin  are  mixed  with  those  of  Pennsylvania  and  Ten- 
nessee, and  melted  with  the  coal  of  Ohio,  West  Virginia  and 
Pennsylvania,  and  the  product  is  gradually  driving  England 
and  Germany  out  of  the  markets  of  the  world.  This  cannot 
be  done  in  any  country  where  government  dictates  maximum 
or  any  other  rates.  The  rate  at  times  necessarily  has  had  to 
be  so  low  that  if  continued  it  would  bankrupt  transportation 
companies,  and  as  a  business  proposition  the  transportation 
companies  never  make  the  rate  so  high  as  to  stop  operation. 

Any  reasonable  rate  enforced  by  law  would  unsettle  all 
of  our  great  mining  industries  and  localize  traffic,  and  prevent 
the  growth  of  cities  in  the  United  States,  as  it  is  intended 
to  do  in  Germany. 

Under  private  control  location  and  distance  is  lost  sight 
of  when  business  conditions  require  it;  government  would 
be  obliged  to  recognize  these  factors  or  do  unconstitutional 
acts. 


142  SOCIALISM  OR  EMPIRE. 

If  we  fear  the  growth  of  large  cities  (the  terror  of  Em- 
perors and  Kings)  the  German  system  of  economics  may  be 
well,  because  a  government  board  or  an  executive  having 
power  to  declare  what  a  reasonable  rate  shall  be,  could 
without  apparent  unjust  acts  dissipate  the  crowded  centers 
around  Pittsburgh,  scatter  the  great  cities  of  Chicago  and 
St.  Louis,  build  up  new  centers  of  industry  in  Tennessee  and 
Virginia,  and  do  it  all  by  law. 

This  is  good  in  Germany  but  do  we  want  it  in  the  United 
States  ? 

In  this  agitation  when  socialists  advocate  an  imperial 
control  over  railroads  by  the  people's  executive,  they  fail 
to  carry  the  results  of  governmental,  control  to  its  logical 
conclusion.  It  of  course  leads  to  the  time  when  a  social- 
istic despotism  or  an  Empire  not  only  controls  but  owns 
the  railroads  under  a  pretence  of  protecting  the  people.  These 
advocates  are  confronted  in  Germany  by  peculiar  condi- 
tions. 

Civil  service  reformers  and  labor  leaders  in  the  United 
States  would  be  shocked  at  the  plain  expression  of  the  Prus- 
sian minister  of  public  works  when  he  informed  the  railroad 
employees  that  "no  employee  can  be  a  social  democratic 
agitator  and  retain  his  position;  that  final  authority  cannot 
at  the  same  time  reside  in  labor  unions  and  in  the  ministry, 
and  that  as  long  as  he  is  minister,  authority  shall  remain  in 
the  department  of  public  wrorks."  I  think  that  even 
our  socialistic  friends  would  not  want  Germany's  control 
duplicated  in  the  United  States. 


AUSTRIAN  RAILWAYS.  143 


CHAPTER  XXI. 

THE  RAILWAYS  OF  AUSTRIA-HUNGARY. 

I  combine  the  Austrian  and  Hungarian  railway  sys- 
tems in  my  comparisons  for  two  reasons.  First:  except  for 
local  purposes  the  rates  made  and  the  objects  desired  are  of 
the  same  general  character,  and  Second:  that  both  systems 
have  passed  through  about  the  same  financial  trouble,  end- 
ing in  being  a  load  on  the  taxpayers. 

These  railroads  were  started  with  the  same  idea  as  those 
of  France,  with  a  purpose  of  enabling  the  Empire  to  control 
the  people  by  governing  lines  of  transportation.  Austria 
attempted  a  complete  ownership  at  first,  but  the  hard  times 
following  the  panic  of  1857  obliged  the  nation  to  sell  out 
to  private  owners  at  a  great  sacrifice.  As  an  inducement 
for  capital  to  invest  and  complete  the  system  planned,  guar- 
antees were  given  that  the  receipts  would  amount  to  certain 
sums.  The  panic  of  1873  and  the  succeeding  depression 
arid  interference  with  transportation  by  Germany  caused 
these  guarantees  to  become  so  onerous  that  as  a  matter  of 
self  protection  the  government  again  assumed  the  policy 
of  government  ownership. 

The  result  is  that  Austria-Hungary  has  23,229  miles  of 
railroad  and  the  government  now  owns  or  operates  all  but 
6,852  miles  and  it  is  its  policy  to  acquire  the  rest.  The  cor- 
porations have  gradually  sold  to  the  Empire  all  the  roads 
which  do  not  pay,  and  are  now  attempting  to  place  a  ficti- 
tious value  on  what  are  left  with  a  view  of  "soaking"  the 
government  in  the  future. 

The  Pennsylvania  Railroad  in  the  United  States  trans- 
ports nearly  as  much  tonnage  each  year  as  the  roads  of  both 
these  nations  combined  and  carries  that  tonnage  at  a  rate  58 
per  cent  less  than  the  roads  in  question. 


144  SOCIALISM  OR  EMPIRE. 

The  mileage  in  Austria  is  about  12,409  and  in  Hungary 
10,820  but  the  traffic  in  Austria  is  nearly  three  times  as  heavy 
as  in  her  sister  state. 

The  Austrian  railroads  represent  a  value  of  $111,032 
per  mile  as  against  $64,860  in  Hungary.  It  is  not  fair  to 
consider  values  in  comparison  with  American  railroads  be- 
cause the  government  pays  a  loss  each  year  of  from  $13,000,- 
ooo  to  $15,000,000  out  of  the  public  treasury,  and  no  one 
could  tell  what  the  value  would  be  if  the  government  with- 
drew support. 

The  railroads  of  Austria-Hungary  through  the  results 
of  government  control,  are  merely  feeders  to  the  waterways 
of  the  country  or  local  connections,  as  in  the  German  states; 
and  if  anything  the  local  jealousies  which  prevent  a  com- 
prehensive rate  making  system,  are  more  fully  developed 
here  than  in  Germany. 

While  apparently  united  on  the  map  and  under  the 
same  emperor  the  business  interests  of  Austria  and  Hungary 
have  always  been  antagonistic,  and  both  of  these  states  use 
their  power  over  railroad  rates  with  a  deliberate  purpose  of 
preventing  the  trade  of  one  state  from  encroaching  on  the  other. 

The  average  rate  per  ton  per  mile  in  1903  was  1.26  cents 
in  Austria  and  1.24  in  Hungary  but  the  change  made  in  1904 
of  the  Zone  tariffs  (which  will  be  explained  later)  will  un- 
doubtedly make  the  rate  amount  to  1.32  or  1.35  cents  per 
ton  per  mile  when  statistics  from  operation  are  received, 
as  against  our  rate  of  0.76  cents  in  the  United  States.  This 
will  put  the  roads  of  these  nations  about  on  a  par  regarding 
freight  charges  with  those  of  France. 

The  railroads  of  Austria-Hungary  are  not  a  success  and 
the  efforts  of  different  ministries  have  been  to  bring  profit 
to  the  state  out  of  the  venture.  The  political  demands  of 
different  sections  of  the  Empire  have  made  this  difficult, 
and  numerous  makeshifts  have  been  attempted. 

Owing  to  a  system  of  roads  which  through  government 
control  and  position  had  a  natural  decentralizing  effect  on 
traffic  the  financiers  of  Austria  adopted  the  "Zone"  system 
of  rate  making,  the  natural  mode  of  centralizing  traffic,  and 
have  wondered  why  it  has  not  been  successful. 

They  appear  to  have  overlooked  the  fact  that  their 
"Zone  system"  as  developed  on  their  railroads  is  about  as 


AUSTRIAN  RAILWAYS.  145 

practical  as  an  attempt  would  be  to  make  water  run  up  hill. 
It  can  be  done  in  a  small  way  but  it  is  expensive. 

The  Zone  system  of  Austria  was  heralded  as  the  true 
solution  of  traffic  control,  through  government  direction, 
and  I  am  not  prepared  to  say  but  what  it  is  the  only  reason- 
able way  that  government  can  do  such  business,  but  it  does  not 
work  successfully  in  Austria  and  would  be  destructive  in 
the  United  States. 

It  ought  to  work  in  France  where  the  interest  of  Paris 
overshadows  that  of  every  other  city,  and  it  is  centering  half 
of  all  the  population  of  Australia  in  a  few  favored  cities,  but 
it  is  not  true  political  economy  in  any  country. 

"The  Zone  System"  is  practical  to  a  certain  extent  for 
passenger  rates,  but  strictly  adhered  to,  destroys  the  flow 
of  freight  necessary  to  create  a  volume  of  traffic.  It  only 
covers  one  feature  of  successful  rate  making  without  con- 
sidering the  importance  of  "routing"  great  volumes  of  freight. 
While  it  recognizes  the  necessity  of  reducing  tariff,  as  dis- 
tance progresses,  it  fails  to  create  the  necessary  constructive 
centers  from  which  volumes  of  traffic  could  be  gathered. 
The  Zone  system  for  freight  traffic  is  nothing  but  a  name 
in  Austria  today.  The  limits  of  zones  have  been  shifted 
repeatedly  and  at  present  the  first  five  zones  are  6  2-10,  3 
i-io,  3  i-io,  4  5-10  and  8  i-io  miles  respectively,  while  the 
other  two  zones  cover  the  balance  of  the  country,  distance 
being  disregarded  beyond  the  250  mile  limit. 

It  can  be  seen  that  the  first  five  zones  only  cover  25 
miles,  and  while  practical  in  the  regulation  of  suburban  pas- 
senger travel,  are  ridiculous  when  considered  in  freight  trans- 
portation. 

Because  of  lack  of  revenues  the  zone  rates  were  increased 
in  1892,  1895  and  in  1903  and  the  last  advance  amounted 
to  12  per  cent  on  primary,  6  per  cent  on  secondary  and  3 
per  cent  on  local  railways,  showing  that  in  floundering  around 
in  an  effort  to  make  profit,  this  last  change  was  reversing 
the  true  principal  of  scientific  traffic  control.  A  government 
rate  per  mile  is  found  impractical  and  this  government  zone 
rate,  the  only  other  way  government  could  make  a  rate  and 
be  fair  to  all  the  sections  of  country,  is  here  found  destructive. 

No  section  of  the  world  suffers  so  mcuh  from  govern- 
ment ownership  and  control  of  railroad  transportation  as 


146  SOCIALISM  OR  EMPIRE. 

eastern  and  central  Europe.  It  is  a  grain  growing  country 
its  mountains  are  filled  with  mineral  deposits  and  covered 
with  great  forests,  the  Carpathian  oil  fields  are  productive 
and  nature  has  placed  in  Austria  as  diversified  a  line  of  pro- 
ducts as  are  found  in  our  central  states.  From  the  Black 
Sea  through  Austria-Hungary  and  Germany,  private  capital 
if  not  interfered  with  by  government  control,  would  have 
constructed  at  least  three  lines  of  railroad,  which  would  have 
equaled  our  trunk  line  systems  and  they  would  have  created 
business  centers  in  Roumania,  Hungary,  Austria  and  Ger- 
many and  opened  up  business  possibilities  in  Central  Europe 
to  such  an  extent  that  the  millions  of  people  whose  whole 
object  in  life  is  at  present,  to  get  enough  money  to  get  away 
from  the  poverty  stricken  country,  would  ridicule  a  man 
who  would  suggest  a  change. 

Natural  routes  exist  for  trans-continental  railroads  in 
Europe  more  easy  to  overcome  in  railway  construction  than 
were  found  in  the  United  States.  Not  a  foot  of  the  way  is 
desert  or  unproductive  country  and  the  tonnage  now  loaded 
into  cars  and  shipped  to  river  stations,  transferred  to  boats 
or  barges,  towed  down  the  rivers  to  the  sea,  transferred  to 
steamers  which  "box  the  compass"  by  starting  east  to  the 
golden  horn  and  going  clear  around  the  continent  of  Europe 
and  ending  with  their  prows  heading  east  again  through  the 
straits  of  Dover,  after  a  trip  of  4,500  miles;  would  cross  the 
country,  and  make  a  profit  at  rates  30  per  cent  less  than  are 
paid  at  present. 

The  volume  of  traffic  is  already  there  without  the  in- 
creased business  natural  to  the  opening  up  of  new  country. 
The  rivers  of  Hungary  have  a  density  of  tonnage  equal  to 
436,000  tons  per  mile  and  the  upper  Danube  of  335,000  tons, 
while  the  coal  and  timber  of  Bohemia  would  make  a  bus- 
ness  of  itself. 

Two  trans-continental  lines  could  each  secure  a  traffic 
amounting  to  at  least  375,000  tons  per  mile  (about  equal 
to  our  western  tonnage)  from  business  already  developed, 
and  under  private  control  of  the  rate  making  power  this 
could  be  doubled  in  four  years'  time. 

It  would,  however  raise  "hob"  with  the  canal  systems 
of  Austria  and  Germany.  It  would  interfere  with  the  gov- 


AUSTRIAN  RAILWAYS.  147 

ernment  subsidized  lines  of  steamers  on  the  Danube.  It 
would  bring  Odessa  within  a  two  days'  trip  of  London,  and 
cause  a  commercial  change  of  the  map  of  Europe.  It 
would  wake  up  the  dreary  places  where  at  present  several 
million  people  only  hope  to  "exist"  till  their  time  shall  come. 

This  change  in  method  of  transportation  would  save 
on  the  shipment  of  grain,  oil,  lumber  and  coal  all  the  cost 
of  the  initial  shipment  to  the  river;  it  would  save  from  10 
to  15  per  cent  of  the  value  to  the  original  producer,  and 
would  create  wealth  where  now  is  poverty. 

But,  with  several  governments  controlling  the  trans- 
portation lines,  and  dictating  cost  of  service,  and  the  several 
states  within  the  governments  themselves,  demanding  re- 
cognition of  their  geographical  control  of  markets;  nothing 
can  be  done. 

Germany  might  acquire  Austria  (a  not  improbable  thing) 
and  still  the  sectional  jealousies  which  the  government  must 
recognize  (and  does  at  the  present  time  in  Germany)  would 
prevent  a  comprehensive  railroad  development. 

Prior  to  1879  Austrian  Statesmen  dreamed  of  a  trans- 
continental trade  passing  through  their  nation,  but  when 
Prussia  adopted  the  system  of  localizing  traffic  on  her  rail- 
roads all  hope  of  such  a  trade  was  abandoned. 

Today  the  Prussian  railroads  promulgate  a  "Lavant 
^tariff"  from  her  interior  cities  to  the  western  coast  of  the 
empire  on  exports  destined  for  Turkey  and  the  Black  Sea 
country,  nearly  half  what  the  regular  rate  would  be,  with 
the  deliberate  intention  of  not  allowing  traffic  to  pass  through 
Austria. 

Austria  uses  her  railroad  tariff  as  a  protection  against 
Germany's  manufactures,  Hungary  against  Austria  and  it 
all  ends  in  the  producer  losing  a  profit  which  would  make 
him  independent  were  it  not  for  the  government  interfering 
with  transportation  business. 

In  Austria- Hungary  in  addition  to  this  sad  loss  the  tax- 
payer who  never  uses  the  railroads,  unconsciously  assists 
in  paying  the  freight  for  those  who  do,  because  of  paying 
tax  to  cover  up  a  treasury  deficiency. 

The  effects  of  government  regulation  of  freight  rates 
in  central  Europe  should  cause  all  of  those  people  of  the 
Central  and  Western  states  to  consider  well  whether  it  is 


148  SOCIALISM  OR  EMPIRE. 

to  their  interest  for  the  government  to  enforce  an  "equalized" 
tariff,  if  you  please,  on  traffic,  or  whether  it  is  not  better  to 
allow  the  private  competition  as  between  our  transportation 
lines  to  make  trade  no  matter  what  the  distance. 

It  shows  that  a  rate  which  is  fair,  one  locality  with   an- 
other, is  still  unfair  to  the  people  as  a  whole. 

It  shows  that  a  rate  control  under  any  form  of  tariff 
promulgated  also  works  injury  if  inflexible,   and  all  forms 
of  government  control  of  necessity  must  recognize  the  rights 
of  localities. 

The  absolute  destruction  of  the  so-called  rights  of  lo- 
cality in  the  United  States  has  created  out  of  our  nation  a 
"homogeneous  whole,"  and  it  should  not  be  changed. 


RUSSIAN  RAILROADS.  149 


CHAPTER  XXII. 

RUSSIAN  RAILROADS. 

There  are  economic  conditions  in  Russia  and  the  United 
States  which  make  a  comparison  between  the  two  countries 
of  much  value. 

Russia  presents  an  example  where  government  attempts 
to  do  business,  and  the  United  States  the  result  of  private 
incentive  not  hampered  by  government  control. 

Seventy  years  ago  each  of  these  countries  presented 
about  the  same  chances  for  economic  development  as  the 
other.  Vast  stretches  of  undeveloped  country  extended 
backward  from  settlements  near  water  transportation,  that 
only  waited  the  advent  of  cheap  land  transportation  to  be- 
come prosperous  and  active  communities. 

Private  capital  operated  in  the  United  States  and  we 
see  as  the  result,  a  net-work  of  railroads  binding  our  country 
together,  operated  so  cheaply  as  to  nearly  eliminate  distance 
from  calculation  of  transportation  and  equalizing  values  of 
all  commodities  over  three  thousand  miles  of  territory.  We 
have  constructed  and  have  in  operation  six  times  as  many 
miles  of  railway  as  Russia  (seven  times  the  amount  of  Rus- 
sia in  Europe)  and  operate  nearly  the  whole  system  at  a  profit, 
paying  taxes  to  the  states  and  communities  amounting  to 
about  $65,000,000  and  giving  the  cheapest  railroad  service 
to  the  people  of  any  railroads  in  the  world. 

In  Russia  with  practically  the  same  natural  resources 
through  the  direct  result  of  the  government's  attempt  to  do' 
business  or  regulate  rates  the  following  results  have  been 
attained. 

Russia  and  Finland  in  Europe  have  but  33,093  miles  of 
road  and  when  the  Siberian  lines  are  counted  still  less  than 
40,000  miles  while  the  United  States  has  over  2 2 0,000  miles 
in  operation. 

The  18,559  miles   of  railroad   the  Russian  Government 


150  SOCIALISM  OR  EMPIRE. 

owns  in  Europe  and  the  Siberian  lines  in  times  of  peace  lost 
$30,900,000  over  cost  of  operation  with  no  payment  of  in- 
terest or  taxes  to  communities.  The  loss  for  the  past  two 
years  cannot  be  calculated  as  the  Siberian  system  was  merely 
a  military  adjunct. 

As  the  government  owns  the  majority  of  railroads  in 
Russian  Europe  a  good  portion  of  which  are  military  ne- 
cessities, it  prevents  private  capital  from  entering  the  trans- 
portation field.  It  would  be  suicidal  to  build  a  railroad  line 
in  competition  with  a  government  owned  road  and  at  the 
same  time  have  a  governmental  control  over  rates,  because 
private  parties  would  necessarily  be  obliged  to  meet  a  com- 
petition which  if  forced  into  a  loss,  the  government  could 
saddle  on  the  public  treasury,  while  the  private  owners  would 
lose  their  own  money. 

Under  these  conditons  the  railroads  of  Russia  while 
costing  an  average  of  $85,000  per  mile  with  vast  fields  of 
virgin  territory  to  draw  from,  only  carried  151,876,000  tons 
of  freight  in  1903  (about  as  much  as  the  Pennsylvania  Rail- 
road system  alone)  at  an  apparent  cost  of  0.87  cents  per  ton 
per  mile,  but  when  the  loss  in  operation  charged  to  the  pub-, 
lie  treasury  is  added,  it  figures  0.99  cents  per  ton  per  mile 
in  comparison  with  the  average  of  0.76  in  the  United  States 

The  great  distance  and  extreme  length  of  haul  of  traffic 
the  same  as  in  the  United  States,  demand  that  a  low  rate 
per  unit  be  made  to  accomodate  even  a  fair  amount  of  busi- 
ness. 

In  Russia  the  political  control  of  rate  making  prevents 
the  creation  of  great  volumes  of  traffic  necessary  to  make 
low  rates  profitable  because  of  the  jealousies  of  sections,  as 
in  Germany. 

Mr.  Witte  several  times  has  attempted  to  introduce 
rate  systems  which  would  counteract  the  great  distance  to 
Siberia  and  Central  Russia  but  the  land  owners  of  the  most 
favored  portion  of  the  Empire,  protest  that  the  government 
has  no  right  to  offset  their  geographical  advantage  by  re- 
ducing rates  on  government  roads  supported  by  the  tax 
payers. 

This  argument  has  been  a  potent  factor  in  destroying 
any  coherent  rate  system  in  Germany  where  the  roads  are 
profitable  and  it  is  a  conclusive  one  in  Russia  where  the  roads 
are  a  load  on  the  taxpayers. 


RUSSIAN  RAILROADS.  151 

Even  an  absolute  monarchy  hesitates  to  tax  the  land 
owners  of  central  Russia  with  a  view  of  creating  lines  of 
competiton  which  the  land  owners  fear  wou  d  naturally 
reduce  the  value  of  their  own  farms;  but  without  the  low 
rates  the  volume  of  traffic  never  can  be  built  up.  Private 
ownership  and  control  of  rates  would  have  paid  no  attention 
to  such  protests.  If  they  saw  a  profit  in  the  business  to  be 
transported  the  local  sections  would  not  be  considered:  if 
the  intermediate  farmers  could  not  compete  with  the  Si- 
berian wheat  growers  they  would  start  raising  something 
else  as  has  been  the  case  in  the  United  States. 

If  government  had  controlled  freight  charges  in  the 
United  States  it  would  have  met  this  same  form  of  pro- 
test, and  the  Mississippi  River  would  sever  our  transpor- 
tation system  more  completely  than  is  done  by  the  Volga 
in  Russia.  The  center  of  the  wheat  growing  district  would 
still  be  in  Ohio  or  Indiana  instead  of  the  far  northwest. 

A  government  in  its  regulation  of  rates  is  obliged  to 
consider  distance  as  the  material  factor;  political  justice 
requires  it ;  but  business  conditions  demand  that  other  things 
be  done  when  necessary  even  though  a  change  of  products 
be  wrought  in  certain  localities. 

Private  enterprise  owning  the  railroads  of  Russia  with 
the  government  attending  to  its  own  business  and  not  inter- 
fering with  rates,  would  long  ere  this  have  developed  great 
industrial  centers  in  Central  Russia,  and  the  farms  of  Siberia 
would  have  become  the  source  of  bread  supply  for  all  of  east- 
ern Europe. 

As  a  lesson  in  Political  economy,  the  central  provinces 
of  Russia  and  the  central  states  of  the  Union  are  examples 
of  two  antipodal  systems.  Through  the  government  regu- 
lation of  rates,  and  the  necessity  of  those  rates  recognizing 
political  factions  (a  logical  sequence  following  public  con- 
trol or  regulation)  the  producers  of  Central  Russia  have  re- 
tained for  those  provinces  their  advantage  in  regard  to  sales 
of  farm  products  and  as  a  result  they  remain  agrarian  com- 
munities. In  the  United  States  the  aggressive  competition 
of  private  capital  carried  the  transportation  of  coarse  grain 
across  Ohio,  Indiana  and  Illinois  and  the  farmers  of  those 
states  by  change  of  crops  and  supplying  the  wants  of  the 
great  industrial  centers,  are  the  richest  in  the  world.  This 


152  SOCIALISM  OR  EMPIRE. 

condition  would  have  been  fought  by  these  three  states, 
if  our  government  had  assumed  to  control  rates  over  rail- 
roads forty  years  ago,  with  the  same  arguments  that  have 
been  used  in  Russia ;  but  results  show  that  if  a  nation  progress- 
es materially,  all  her  people  receive  a  reflex  benefit  thereby, 
and  the  principal  thing  which  has  made  Ohio,  Indiana,  Illi- 
nois and  Pennsylvania  great,  is  the  fact  that  logical  free 
competition  in  grain  raising  forced  them  to  other  channels 
of  trade  and  opened  up  great  grain  growing  centers  in  the 
west,  which  now  assist  those,  states  more  than  they  could  have 
assisted  themselves. 

The  Czar  of  Russia  is  its  principal  land  owner  and  nat- 
urally has  constituted  railroads  with  a  view  of  improving 
his  own  property,  and  as  a  military  necessity;  so  that  the 
yearly  loss  from  operation  of  the  roads  while  a  burden  on 
the  public  treasury  is  a  benefit  personally  to  the  crown. 

While  this  is  one  of  the  reasons  for  Russia's  loss  from 
railroad  operations,  the  main  reason  is  from  the  fact  that 
the  low  rates  necessary  to  create  a  paying  volume  of  traffic 
cannot  be  made  by  the  government,  because  of  this  sectional 
political  antagonism  developed  in  the  nation  itself. 

In  Russia,  the  same  as  in  Austria,  Germany  and  France 
the  very  fact  of  rate  regulation  being  a  province  of  govern- 
ment prevents  low  rates  and  cheap  transportation,  because 
government  must  recognize  the  protest  of  section  against 
section,  and  instead  of  an  effort  to  create  cheap  transpor- 
tation the  principal  duty  of  government  is  to  equalize  rates 
to  suit  sections  instead  of  attempting  to  perform  the  more 
important  function. 

In  Russia,  as  in  all  countries  where  government  con- 
trols the  rate  making  power,  the  whole  people  are  prevented 
from  receiving  the  benefit  of  a  greater  unit  value  per  bushel 
of  wheat  or  other  produce  caused  by  a  general  reduction  of 
tariff,  which  can  only  be  made  possible  through  great  volume 
of  traffic,  because  of  the  political  influences  connected  with 
the  strife  of  one  section  against  the  other. 

At  this  late  day  if  the  United  States  changes  her  policy 
and  adopts  that  of  Russia,  the  conflict  of  opinion  as  to  what 
a  "reasonable"  rate  should  be,  will  soon  be  made  a  political 
factor  and  its  effect  on  rates  would  be  to  advance  and  not 
reduce  the  tariffs  charged. 


RUSSIAN    RAILROADS.  153 

It  is  useless  to  say  the  great  Western  States  would  feel 
it  first,  but  the  changes  demanded  would  soon  extend  to 
our  mining  products  and  manufacturing  interests,  with  the 
effect  of  localizing  our  traffic  and  increasing  cost  of  trans- 
portation to  the  people. 

There  may  be  theorists  who  believe  that  the  government 
can  control  rates  without  political  comp'ication,  but  this 
example  in  Russia  where  an  Autocratic  Ruler  is  forced  to 
recognize  political  jealousies  in  using  this  power,  and  when  the 
same  condition  is  found  in  Switzerland,  Australia  and  New 
Zealand,  it  should  be  conclusive  that  no  form  of  government 
can  successfully  dictate  a  tariff  on  transportation  lines  and 
really  benefit  the  business  of  the  whole  country. 

In  the  United  States  we  will  be  more  subject  to  political 
influence  with  such  a  power  than  under  a  socialistic  or  im- 
perial government,  and  it  will  not  take  long  for  sectional 
jealousies  to  force  government  into  positions  which  will  be 
very  expensive  to  our  business  interests. 


154  SOCIALISM  OR  EMPIRE. 


CHAPTER  XXIII. 

RAILROADS  OP  ITALY,  SWITZERLAND,  ETC. 

In  the  smaller  European  nations  there  are  41,691  miles  of 
railroad  and  in  all  of  them  except  Spain  and  Greece  the  gov- 
ernment either  owns  the  roads  or  controls  the  rate  making 
power. 

The  condition  of  control  varies  from  full  government 
ownership  and  operation  down  to  the  control  exercised  by 
most  forms  of  monarchial  government  through  the  Executive 
Departmnet,  i.  e.,  the  enforcement  of  a  maximum  rate. 

In  Spain  and  Greece  the  private  ownership  of  railroad 
property  is  recognized  and  protected  by  the  government. 

The  nations  which  assume  to  control,  or  which  own  rail- 
road property,  generally  use  them  as  an  adjunct  to  the  ad- 
ministration, and  to  extend  political  control  of  legislation 
and  as  an  aid  to  the  governmental  control  of  the  people. 

The  railroads  of  the  smaller  nations  of  Europe  with  any 
considerable  mileage  are  distributed  as  follows: 

Owned  by  Private 

Miles  Government  Owned 

Italy 9,966  9,966 

Spain 8,606  8,606 

Sweden 7,697  2,416  5,281 

Norway 1,456  1,316  140 

Belgium 4,237  3,907  330 

Denmark 1,963  1,112  851 

Netherlands i,77*  971  800 

Portugal 1,487  525  962 

Bulgaria 921  729  192 

Greece 643  643 

Servia 369  355  14 

Switzerland 2,575  2*575 


41,691  23,872  17.819 

(Details   from   Roumania   and   Turkey   not  obtainable.) 


SMALLER  EUROPEAN  STATES.  155 

The  railroad  situation  in  Italy  is  a  travesty  on  business 
methods. 

From  the  inception  up  to  the  present  time  their  opera- 
tion and  control  has  been  a  financial  nightmare. 

Originally  constructed  as  competing  ventures  by  the 
several  states  with  each  state  assuming  a  different  kind  of  con- 
trol (usually  an  attempt  to  localize  traffic  within  each  state), 
the  whole  policy  and  intent  of  the  roads  was  diverted  upon 
the  nationalization  of  Italy.  These  semi-antagonistic  sys- 
tems were  then  connected  through  the  use  of  government 
funds,  and  to  appearances  Italy  has  a  complete  system  of 
railroads  encircling  the  kingdom. 

When  the  roads  were  nationalized  the  government  recog- 
nized the  demands  of  the  several  states  to  a  more  or  less  ex- 
tent and  in  the  tariffs  promulgated  continued  the  process 
of  decentralizing  traffic  and  as  a  result  the  system  is  merely 
a  lot  of  local  lines  with  very  little  business. 

For  years  the  government  of  Italy  has  been  trying  to 
"do  something"  with  its  railroads.  First  leasing  them  to 
private  companies  with  a  guarantee  of  earnings  and  losing 
money  through  this  guarantee,  they  tired  of  the  bargain  and 
attempted  to  operate  the  roads  by  government  employees. 
This,  however  did  not  stop  the  drain  on  the  treasury  and  gave 
poorer  service  than  the  leasing  companies  had  given.  The 
political  quiet  which  Italy  had  commenced  to  feel  twenty 
years  ago,  induced  three  strong  private  companies  to  attempt 
the  operation  of  the  roads  under  a  new  lease.  The  contract 
was  for  sixty  years  with  a  privilege  of  either  party  giving 
notice  for  a  change  at  a  twenty  year  period.  The  first  twenty 
year  period  expired  in  1905  and  an  extraordinary  condition 
is  developed  by  both  the  companies  and  the  government 
giving  notice  that  a  change  is  desired.  The  government, 
because  it  still  loses  $2,000,000.00  per  year  through  its  own- 
ership of  the  property  and  the  companies  because  they  work 
hard  and  receive  no  profit. 

The  private  companies  now  offer  approximately  $75,000 
per  mile  for  the  roads,  and  the  government,  although  it  would 
mean  a  loss  of  several  hundred  millions  is  considering  the 
proposition. 

If  the  government  would  sell  the  roads  to  private  par- 
ties and  allow  business  conditions  to  govern  the  rate  making 


156  SOCIALISM  OR  EMPIRE. 

power   instead   of   political   considerations   the   railroads   of 
Italy    would   be   made   to   pay. 

As  it  is  today  the  government  loses  money  and  the  roads 
themselves  look  fully  as  bad  as  the  operating  companies 
feel.  In  1878  the  Italian  government  made  the  most  ex- 
tensive investigation  in  regard  to  the  operation  of  railroads 
ever  attempted,  and  ever  since  that  time  Italy  has  adopted 
the  policy  of  trying  in  some  way  to  induce  private  capital 
to  take  charge  of  her  railroad  system. 

The  lowest  yearly  average  charge  per  ton  per  mile  on  freight 
was  1.58  cents  in  1899  but  it  has  since  ranged  from  about 
i. 60  to  1.64  as  against  the  average  rate  in  the  United  States 
of  0.76  cents,  and  with  a  government  regulation  of  rates 
Italy  cannot  expect  a  lower  service  as  the  nation  only  fur- 
nished 21,978,033  tons  of  freight  for  her  railroads  to  carry 
in  1903. 

I  have  not  been  able  to  get  the  details  of  operation  on 
Spanish  railroads,  but  I  have  no  doubt  their  rate  on  freight 
is  much  higher  than  in  the  United  States,  because  the  roads 
are  poor  and  this  can  hardly  fail  to  oblige  a  high  tariff. 

Such  is  the  history  of  railroads  all  over  the  world. 

The  geographical  conditions  in  Sweden  prevent  any 
concentration  of  traffic  which  would  warrant  cheap  service 
but  the  average  charge  of  1.70  to  1.73  per  ton  per  mile  charged 
in  that  country,  could  be  materially  reduced  if  the  govern- 
ment would  keep  its  "hands  off"  business  affairs.  About 
the  only  remarkable  thing  to  be  mentioned  is  the  fact  that 
the  government  roads  of  Sweden  cost  $44,048.00  per  mile 
while  the  private  companies  have  only  paid  $22,400.00  per 
mile. 

In  all  of  the  smaller  kingdoms  of  Europe  except  Belgium 
and  Denmark  the  average  charge  per  ton  per  mile  is  approxi- 
mately 1.70  cents. 

Belgium  carries  passengers  cheaper  than  any  other  na- 
tion in  the  world  except  Japan.  Her  average  charge  of  0.77 
cents  per  mile  is  but  another  proof  of  the  necessity  of  volume 
of  traffic  as  an  adjunct  to  cheap  transportation.  While  her 
system  of  narrow  guage  feeders  to  trunk  lines  of  broader 
gauge,  concentrates  traffic  along  definite  lines,  the  fact  that 
Belgium  is  the  most  thickly  settled  country  in  the  world  is 
the  principal  reason  why  cheap  passenger  service  is  furnished. 


SMALLER  EUROPEAN  STATES.  157 

Belgium  has  587  residents  per  square  mile,  while  Ohio  has 
105  and  the  United  States  but  26,  Europe  excluding  Russia 
169,  and  it  can  be  seen  that  there  are  twenty-two  times  as 
many  people  to  pay  revenue  as  in  the  United  States. 

The  charge  for  freight  in  Belgium  is  1.20  cents  per  ton 
per  mile,  and  the  railroads  of  Belgium  are  profitable  because 
in  handling  freight  this  concentration  from  local  lines  which 
I  have  mentioned  assists  in  giving  volume  along  definite  lines 
but  still  it  can  be  seen  that  her  freight  rates  are  56  per  cent 
higher  than  in  the  United  States. 

The  railroads  of  Belgium  through  a  bond  manipulation 
represent  a  value  of  $167,898.00  per  mile  and  thus  pay  in- 
terest on  over  three  times  as  much  money  as  we  do  in  the 
United  States,  but  as  it  is  the  King's  business,  there  is  no 
talk  of  watered  stock  over  there. 

The  only  other  nation  in  Europe  worth  considering  is 
the  socialist  republic  of  Switzerland,  and  I  have  placed  this 
country  at  the  bottom  of  the  list  in  European  comparisons, 
because  I  want  the  comparison  to  run  on  from  this  attempt 
at  socialism  to  those  other  semi-socialistic  attempts  in  Aus- 
tralasia (Australia  and  New  Zealand). 

We  have  gone  over  the  record  of  government  control 
through  the  natural  power  of  monarchy  which  over-rides 
law,  legislation  and  business  conditions  by  executive 
force  and  find  that  this  power  over  business  conditions  is 
not  for  the  best  interests  of  the  people. 

Remember  that  France  is  now  sailing  under  the  name 
of  a  Republic  but  following  the  principals  of  government 
business  regulation,  through  precedents  established  by  an 
Empire. 

Switzerland  is  a  Republic  in  name  but  a  socialistic  des- 
potism in  fact.  So  much  has  been  said  of  the  beauties  of 
government  in  Switzerland  that  it  would  fill  a  book  to  com- 
bat the  theory  of  government  presented. 

I  only  want  to  show  here  that  a  control  by  the  "people," 
if  you  please,  of  great  business  ventures  does  not  furnish  as 
cheap  or  comprehensive  service  as  would  be  brought  about 
by  personal  incentive  and  business  competition. 

The  purchase  of  the  railroads  of  Switzerland  by  govern- 
ment is  of  such  recent  date  that  definite  figures  cannot  be 
given  regarding  results  of  operation,  but  the  rates  have  not 


158  SOCIALISM  OR  EMPIRE. 

been  changed,  and  as  the  receipts  from  operation  were  ac- 
cepted as  a  basis  of  value,  it  is  proper  to  continue  the  com- 
parisons. 

These  twenty-two  states  comprising  the  Swiss  Republic 
are  of  very  limited  extent,  there  are  several  counties  in  Cali- 
fornia, Colorado  and  Texas,  each  with  a  larger  acreage  than 
the  whole  republic,  and  the  2,575  mites  of  railroad  now  con- 
structed about  completes  any  system  that  could  be  planned. 
These  railroads  were  constructed  with  a  provision  in  their 
charter  that  the  state  could  buy  at  a  set  term  of  years.  Fol- 
lowing the  ideas  of  socialist  ownership  the  state  decided  in 
1897  to  purchase  the  roads,  and  the  final  close  of  the  tran- 
saction culminates  in  1909. 

The  provisions  governing  the  purchase  were  a  practical 
capitalization  of  net  earnings  at  4  per  cent  and  payment  to 
be  made  on  that  basis  if  it  was  not  less  than  the  cost  of  the 
railroad  construction. 

An  average  of  ten  years  operation  was  taken,  and  a  pay- 
ment equaling  twenty  four  times  the  yearly  earnings  thus 
determined  was  the  price  to  be  paid.  The  Swiss  railroads 
were  capitalized  for  $106,759.00  per  mile  and  the  purchase 
price  will  increase  this  sum  slightly. 

If  the  people  would  approach  railroad  investors  in  the 
United  States  and  offer  a  price  for  our  railroads,  based  on 
the  last  five  years  operation,  I  do  not  believe  there  are  a  dozen 
railroads  in  the  country  but  that  would  gladly  sell  to  the 
government  on  the  Swiss  conditions,  but  the  people  would 
stand  to  lose  $7,000,000,000  in  case  of  panic  or  successive 
crop  failures  and  would  increase  their  taxation  to  a  point 
near  confiscation. 

The  Swiss  roads  have  been  charging  an  average  of  two 
cents  per  ton  per  mile  for  freight  carried,  and  their  service 
is  ridiculous  when  compared  with  American  methods,  and 
the  wages  paid  to  railroad  men  would  not  induce  a  section 
hand  on  one  of  our  railraods  to  take  the  position  of  Engineer 
or  Conductor  in  Switzerland. 

It  is  evident  that  the  socialistic  idea  in  Switzerland  was 
to  take  over  the  railroads  with  a  view  of  making  them  pay 
a  profit  to  the  state  even  though  the  purchase  price  was  high. 

Their  principal  travel  is  from  tourists  and  their  idea  is 
to  have  the  republic  live  off  "outside  capital"  as  we  in  the 
west  say. 


SMALLER  EUROPEAN  STATES.  159 

They  do  not  expect  to  grow;  they  cover  all  the  ground 
there  is  with  the  present  population,  they  do  not  expect 
more  railroads  to  be  built,  and  it  is  not  supposed  that  the 
interest  of  business  men  in  Switzerland  are  considered  in 
making  rates  at  all. 

The  ownership  after  completion  means  the  certain  end 
of  all  competition  in  transportation.  The  roads  if  they  pay 
well  will  help  out  the  resources  of  the  state,  and  if  they  lose 
the  people  will  make  it  up  by  taxation.  In  these  little  states 
such  a  trade  might  do,  especially  when  the  game  is  to  "beat 
the  tourist,"  but  it  could  only  help  the  people  by  imposing 
on  the  outside  public.  Switzerland  in  this  transaction  only 
follows  the  footsteps  of  Empire. 

She  adopted  Germany's  method  of  purchase  and  uses 
her  railroads  for  profit.  Germany  uses  her  railroads  as  a 
rebater  on  Exports  and  a  protective  tariff  against  imports, 
while  Switzerland  "pulls  the  leg"  of  the  traveling  public  as 
its  main  source  of  revenue. 

The  Swiss  ownership  of  her  railroad  system  is  still  an 
experiment  although  I  cannot  see  but  that  it  will  end  in  suc- 
cess along  the  lines  I  have  described,  but  such  an  ownership 
and  control  in  the  United  States  or  any  growing  country 
would  end  in  complete  failure. 

The  examples  I  give  in  succeeding  chapters  will  show 
partial  results  in  other  semi-socialistic  countries,  and  prove 
that  about  as  unsatisfactory  conditions  are  brought  about 
through  ownership  of  transportation  lines  by  the  people, 
as  could  be  developed  by  the  most  grasping  "trust." 

The  railroads  of  Switzerland  are  now  in  truth  a  trust 
with  no  possible  way  of  their  customers  getting  around  what- 
ever charge  is  imposed. 

In  every  country  of  Europe  the  producer  of  wealth  does 
not  receive  the  benefits  of  cheap  transportation  of  products. 
Government  makes  a  low  passenger  rate  and  proudly  points 
to  the  fact,  while  through  their  system  of  control,  each  ton 
of  grain,  iron,  coal  and  merchandise  pays  a  toll  higher  than 
the  passenger  per  unit.  There  are  two  tons  of  freight  carried 
a  mile  to  one  passenger  even  in  crowded  Europe  while  in  the 
United  States  there  are  over  8  tons  of  freight  for  each  pas- 
senger carried. 

This  comparison  of  passenger  fares  deceives  the  public. 


160  SOCIALISM  OR  EMPIRE. 

It  is  true  we  pay  an  average  of  |  cent  a  mile  more  for  passen- 
ger travel  in  the  United  States  than  is  paid  in  Europe  and 
twice  as  much  as  is  paid  in  New  Zealand,  but  we  get  better 
service  and  far  better  accommodations  than  in  these  other 
countries,  and  the  farmer,  the  miner,  the  lumberman  and  the 
business  man  is  allowed  to  receive  the  benefit  of  a  50  per 
cent  reduction  in  freight  (on  an  average  of  8  tons  per  pas- 
senger carried)  on  the  products  sold  and  marketed. 

It  is  this  per  centage  which  has  made  this  nation  the 
richest  in  the  world.  It  has  enabled  the  farmer  of  the  west 
to  market  his  crop  in  the  industrial  centers  of  Europe  and 
through  the  profit  per  unit  brought  about  by  private  competi- 
tion in  transportation  in  the  United  States  he  makes  money; 
while  the  farmer  of  Russia,  Roumania,  Servia,  Austria  and 
Eastern  Germany  ekes  out  a  miserable  existence,  or  comes 
to  the  United  States  to  better  his  condition. 

The  prime  reason  for  this  hardship  to  the  producer  is 
the  fact  that  those  governments  interfere  with  enlightened 
control  of  business  methods. 

Their  attempt  to  do,  what  now  appears  to  be  the  desire 
of  many  that  our  own  government  should  do,  is  the  direct  cause 
of  the  poverty  of  their  people. 

The  only  thing  that  government  control  appears  to 
succeed  in  doing  is  to  prevent  one  locality  from  interfering 
with  another's  market. 

I  feel  that  the  elimination  of  distance  on  the  part  of  our 
railroads,  and  the  creating  of  a  homogeneous  whole  out  of  the 
United  States,  instead  of  sectional  divisions,  is  the  prime 
reason  for  our  prosperity;  and  that  any  "regulation"  by  gov- 
ernment which  would  dictate  price  of  service  is  destructive. 


AUSTRALIA  AND  NEW  ZEALAND.  1G1 


CHAPTER.  XXIV. 

AUSTRALIAN  AND  NEW  ZEALAND  RAILWAYS. 

The  ultimate  results  obtained  through  a  control  of  busi- 
ness affairs  by  an  Autocratic,  Paternal  or  Socialistic  govern- 
ment, are  the  same,  only  the  socialistic  control  is  the  more 
weak  and  vacillating. 

The  Socialist  government  now  controlling  Switzerland 
follows  in  the  exact  footsteps  of  the  German  Empire,  in  regu- 
lating, owning  and  operating  her  lines  of  transportation. 
They  adopted  practically  the  same  form  of  purchase,  and 
use  the  railroads  in  the  same  way. 

Fortunately  for  both  countries,  their  small  territory 
had  been  fairly  well  supplied  with  lines  of  railroad  before 
government  purchase,  as  it  can  be  seen  that  the  form  of  con- 
trol exerted  by  either  nation  prevents  all  competition,  and 
that  the  railroads  are  used  as  a  form  of  tax  on  business  for 
the  benefit  of  the  state. 

They  charge  two  or  three  times  as  much  for  freight  ser- 
vice as  is  charged  in  the  United  States  and  it  is  evident  that 
competition  here,  between  private  owned  roads,  results  in 
cheaper  service  than  under  any  form  of  state  cbntrol  even 
when  the  government  owns  the  roads. 

Australia  and  New  Zealand  present  another  form  of 
government.  They  have  a  peculiar  mixture  of  Socialism 
and  Empire,  and  are  cited  with  a  view  of  showing  the  paral- 
lel lines  of  thought  between  the  two  ideas  of  government. 

Australasia  presents  examples  of  Monarchial  representa- 
tive government  controlled  by  paternal  socialism. 

In  their  control,  regulation  and  ownership  of  railroads 
these  countries  retain  the  executive  powers  inherited  from 
Imperial  England,  which  now  are  controlled  or  intimidated 
by  a  democratic  mob. 

This  is  a  fair  sample  of  what  we  are  trying  to  achieve  in  the 


162  SOCIALISM  OR  EMPIRE. 

United  States  today.  We  want  to  place  the  controlling 
power  in  the  Executive  Department,  and  it  is  the  hope  of 
socialism  to  be  able  hereafter  to  control  the  executive.  Aus- 
tralia could  be  used  as  the  "horrible  example"  resulting  from 
such  a  combination. 

When  the  states  of  Australia  entered  into  the  operation 
of  railroads,  they  attempted  to  inaugurate  a  control  that  would 
benefit  the  commonwealth. 

Parliament  and  the  government  induced  able  transpor- 
tation men  to  come  to  Australia  and  operate  the  government 
controlled  lines. 

Offering  good  pay  and  an  assurance  of  support,  several 
of  the  most  successful  managers  of  railroad  property  in  Eng- 
land attempted  to  operate  these  public  owned  roads  in  Aus- 
tralia. 

Not  one  of  the  able  managers  imported  for  this  service 
who  attempted  to  operate  the  railroads  along  business  lines, 
with  a  view  of  making  them  productive,  was  supported  by 
the  Parliament. 

Politics  soon  centered  the  fire  of  criticism  on  these  con- 
scientious men  and  Spreight  and  Eddy  died  of  broken  hearts 
and  Smith  and  Mathieson  resigned  and  returned  to  England. 

They  found  that  it  was  a  different  thing  to  operate  rail- 
roads owned  by  private  parties  and  roads  owned  by  the  people. 

They  found  that  all  discipline  was  destroyed  through 
political  "pull"  and  all  chance  of  profit  prevented  by  sectional 
jealousy. 

They  found  that  this  semi-socialist  form  of  govern- 
ment created  many  masters,  each  one  more  impractical  than 
the  other.  The  result  is  that  in  Australia  or  New  Zealand 
only  the  most  ordinary  talent  can  be  used;  the  managers 
must  be  so  commonplace  as  to  be  oblivious  to  criticism, 
or  so  lacking  in  pride  as  to  accept  the  dictation  of  ignorant 
legislators  and  labor  agitators  without  protest.  Controlling 
factions  in  Parliament  prevent  discharge  of  incompetents, 
and  the  result  is  naturally  a  railroad  commission  which  serves 
for  the  pay,  instead  of  for  reputation  or  glory. 

The  financial  result  is  a  loss  in  the  operation  of  these 
railroads.  In  Australia  the  interests  of  the  different  states, 
each  one  of  which  desires  to  centralize  the  business  of  their 
tributary  territory  at  their  own  commercial  center,  prevents 


AUSTRALIA  AND  NEW  ZEALAND.  163 

a  comprehensive  system  of  transportation.  This  jealousy 
goes  so  far  that  the  gauge  of  the  roads  differs  in  the  different 
states.  Each  state  is  attempting  to  develop  trade  with  its 
controlling  seaport,  and  as  this  attempt  necessarily  must 
recognize  the  political  influences  controlling  the  Parliament, 
all  true  business  features  governing  transportation  are  set 
at  nought. 

The  rates  are  made  per  mile  on  the  principle  of  the  "Zone 
system,"  and  as  no  "constructive  centers"  or  basing  points 
have  been  established,  the  result  is  a  complete  destruction 
of  all  "interior"  business  points  or  trade  centers.  As  an 
instance  when  the  Victorian  Railroad  terminated  at  Bal- 
larat  a  great  distributing  point  was  established  there,  but 
when  the  roads  were  extended  farther,  the  adding  of  two 
"Zone  rates"  together  destroyed  the  trade  of  Ballarat  and 
the  enterprising  merchants  or  manufacturers  established 
there,  moved  to  Melbourne,  or  lost  their  trade. 

The  result  is  that  the  great  seaports  of  Australia  have 
destroyed  competition  and  by  a  control  of  over  50  per  cent 
of  the  legislators  they  make  all  of  the  interior  country  agrar- 
ian adjuncts  to  their  interests. 

No  manufacturers  in  the  interior  can  compete  with  the 
products  of  the  sea  coast  cities  and  this  is  the  direct  result  of 
government  control  of  rates  guided  by  political  pull  in  par- 
liament. 

The  rivalry  of  the  states  is  the  only  cause  of  compe- 
tition in  transportation  and  at  times  it  goes  so  far  as  to  make 
a  state  lose  money  by  railroad  operation,  for  the  purpose 
of  securing  trade  for  a  certain  locality. 

The  Victorian  government  openly  asserted  that  they 
would  rather  lose  money  in  hauling  the  wool  from  the  Riv- 
erina  trade  than  have  Melbourne  lose  the  benefit  derived 
from  handling  the  product.  This  is  socialism  in  its  best 
form,  but  it  is  evident  that  the  majority  rules  with  an  iron 
hand  and  even  loses  the  money  of  the  people,  if  perchance 
it  helps  the  leaders  of  the  governing  faction. 

Having  destroyed  the  railroad  system  for  all  of  the  great- 
er purposes  of  trade,  and  distributed  traffic  to  an  extent 
which  prevents  a  fair  rate  from  paying  the  transportation 
lines,  the  result  is  that  the  average  rate  per  ton  per  mile  in 


164  SOCIALISM  OR  EMPIRE. 

Australia  is  2.08  cents  while  in  the  United  States  it  is  0.76. 
The  average  rate  on  grain  is  0.9 8  cents  per  ton  per  mile  while 
in  the  United  States  it  is  0.51. 

This  scattering  of  traffic  prevents  any  heavy  movement 
of  freight  between  definite  centers  of  trade,  and  the  average 
train  load  in  Australia  is  but  74  tons  (about  three 
American  carloads)  and  with  tariffs  two  to  three  times  as 
high  as  those  charged  in  this  country  the  roads  fail  to  pay  inter- 
est on  their  cost  even  though  that  interest  is  figured  at  but 
3  66-100  per  cent.  The  taxpayers  are  each  year  called  upon 
to  pay  a  deficiency,  or  the  capital  of  the  road  is  increased 
without  additional  mileage  to  make  up  the  loss. 

As  an  example  of  the  extent  to  which  this  "covering  up" 
of  mismanagement  goes,  it  is  only  necessary  to  quote  that  in 
New  South  Wales,  one  of  the  Australian  States,  her  3,280 
miles  of  road  probably  worth  $45,000  per  mile  now  is  bonded 
for  43,062,550  pounds  or  about  $65,000  per  mile. 

Last  year  $3,670,165  capital  was  issued  with  no  increase 
of  mileage  whatever. 

Even  with  this  cheat  in  bookkeeping  to  cover  up  the 
real  deficiency  an  acknowledged  shortage  of  $135,000  is  ad- 
mitted in  the  payment  of  interest. 

In  the  five  most  populous  provinces  of  Australia  (West- 
ern Australia  not  included)  the  increase  of  railroad  capital- 
ization last  year  amounted  to  $8,133,335  with  but  71  miles 
of  new  road  constructed.  Thirteen  miles  of  this  increase 
was  standard  and  fifty  eight  narrow  gauge,  the  latter  not 
being  worth  over  $35,000  per  mile. 

The  government  report  on  railroad  operation  in  Aus- 
tralia is  a  distortion  of  facts  so  remarkable  as  to  impress 
one  with  the  idea  that  these  ignorant  men,  either  did  not 
know  what  their  own  figures  meant  or  that  they  were  at- 
tempting to  deceive  the  people,  or  the  investors. 

They  report  a  net  earning  of  $22,049,715  on  an  invest- 
ment of  $617,292,440  the  interest  charge  on  which  amounts 
to  over  $22,600,000. 

This  is  made  to  appear  as  though  the  roads  were  car- 
rying themselves  when  in  fact  they  issued  $8,133,335  more 
bonds  with  but  71  miles  increase  of  trackage  worth  at  the 
highest  calculation  but  $2,680,000,  so  that  $5,453,335  is 
clearly  to  be  deducted  from  net  earnings  reported. 


AUSTRALIA  AND  NEW  ZEALAND.  165 

This  leaves  them  but  $16,596,380  with  which  to  pay 
$22,600,000  interest  and  not  a  cent  of  tax  is  paid  by  the 
railroads. 

If  this  natural  charge  to  all  private  owned  property  is 
considered  and  figured  on  the  basis  of  the  average  charge 
in  the  United  States  (i.  e.  3  per  cent  of  gross  earnings)  an- 
other deduction  of  $1,529,188  should  be  made  from  the  net 
earnings.  If  this  is  done  it  shows  that  the  taxpayers  lost 
over  $7,500,000  either  in  cash,  increased  indebtedness  or 
failure  to  collect  taxes,  by  railroad  operation  in  1905,  the 
most  prosperous  year  in  their  existence. 

An  investigation  of  the  reports  of  operation  in  the  different 
states,  if  taxes  are  considered,  will  show  that  in  New  South 
Wales  the  railroads  paid  but  i£  per  cent,  Queensland  but 
.08  per  cent  and  in  Tasmania  .07  per  cent  and  the  Common- 
wealth made  up  the  difference  by  taxation. 

^  Some  socialist  writers  publish  these  garbled  reports  and 
talk  of  the  good  showing  made,  but  fail  to  show  that  the  poor 
farmers  of  that  country  pay  from  two  to  three  times  the 
freight  charged  in  the  United  States. 

With  all  the  advertisement  Australia  has  received  dur- 
ing the  past  twenty  years  only  two  inland  cities  (Ballarat  and 
Bendigo)  have  advanced  to  over  40,000  population. 

I  have  explained  how  Ballarat  has  lost  her  trade  through 
the  extension  of  roads  beyond  that  city  and  as  the  result  of  a 
government  rate,  and  Bendigo  is  in  the  same  class. 

It  is  possible  to  travel  from  Brisbane,  the  capital  of 
Queensland,  via  Sidney  and  Melbourne  to  Adelaide  in  South 
Australia,  a  distance  of  1500  miles;  but  it  is  improbable 
that  freight  would  be  transported  over  that  route,  because  the 
different  states  would  impose  a  charge  so  high  and  the  trans- 
fers would  be  so  expensive  that  Australia  does  not  produce 
anything  with  enough  value  to  afford  to  pay  the  freight. 

Improvements  cannot  be  made  because  if  $4,000,000 
would  be  required  to  fix  up  the  railroads  as  much  more  would 
be  required  to  assist  the  other  interests  supported  by  the  gov- 
ernment. 

On  one  of  their  most  important  lines  a  "switchback" 
is  used,  the  operation  of  which  imposes  on  the  traffic  a  charge 
amounting  to  over  five  millions  of  dollars  per  year,  which 
could  be  saved  by  digging  a  tunnel  at  a  cost  of  $2,500,000 


166  SOCIALISM  OR  EMPIRE. 

but  the  "people"  don't  see  the  importance,  and  as  the  freight 
pays  the  charge,  do  not  care  to  assume  the  necessary  ex- 
pense. Australia  has  constructed  11,973  miles  of  railroad, 
and  they  are  merely  adjuncts  to  seaport  towns  with  no  idea 
of  upbuilding  great  interior  centers  of  trade,  and  thus  es- 
tablishing home  markets  for  the  agrarian  population. 

Private  ownership  would  have  created  trade  centers, 
if  the  government  had  left  the  roads  alone ;  and  while  protests 
of  one  section  against  another  would  naturally  have  been 
heard,  the  strife  for  business  would  have  resulted  in  great 
wealth  for  the  country. 

Australia  has  been  "held  back"  by  the  political  control 
of  transportation,  and  progressive  men  have  found  other 
fields  for  investment  of  capital.  The  natural  resources  are 
there,  but  the  incentive  for  development  is  lacking.  The 
construction  of  but  71  miles  of  railroad  in  all  Australia  in 
1905  is  conclusive  proof  of  "dry  rot"  in  business. 

New  Zealand  is  more  fortunate  in  her  political  control 
from  the  fact  that  conservative  men  have  chanced  to  repre- 
sent her  in  Parliament.  In  Australia  the  Agitator  has  at 
times  changed  all  the  plans  of  government;  but  in  New  Zea- 
land the  policy  has  run  along  without  much  alteration. 

New  Zealand,  if  anything,  is  more  socialistic  than  Aus- 
tralia and  if  success  could  be  attained  by  that  heresy  it 
might  be  developed  there. 

This  colony  owns  and  operates  about  2170  miles  of  rail- 
road. They  cost  about  $45,000  per  mile  to  construct  but 
the  capital  stock  account  is  increasing  in  the  same  way  as 
in  Australia  only  in  a  more  conservative  manner. 

As  long  as  these  colonies  can  borrow  money  easily  they 
can  carry  their  loss  in  operation  forward  to  the  future. 

New  Zealand  has  increased  her  mileage  about  10  per 
cent  during  the  past  five  years  but  the  railroad  capital  ac- 
count has  increased  26  per  cent. 

In  New  Zealand  the  rage  for  "cheap  things"  has  forced 
the  railroad  commissioners  to  make  a  ridiculously  low  rate 
of  fare  for  passengers,  and  this  apparently  blinds  the  people 
to  the  fact  that  their  business  interests  are  made  to  suffer 
in  return.  While  passenger  fares  are  less  than  in  the  United 
States,  the  average  rate  per  ton  per  mile  on  freight  amounts 
to  1.97  cents  while  in  the  United  States  the  average  rate  is 


AUSTRALIA  AND  NEW  ZEALAND.  167 

but  0.76.  In  this  mecca  for  socialists  where  wages  are  from 
one  third  to  one  half  what  is  paid  in  the  United  States,  the 
freight  rates  while  three  times  as  high  as  in  this  country,  can- 
not be  lowered  without  disaster  to  the  state. 

The  interests  of  different  communities  have  to  be  con- 
sidered, and  the  roads  are  so  constructed  that  it  is  impossible 
for  them  to  secure  tonnage  enough  to  make  a  low  rate  per  unit. 

In  the  North  Island,  only  a  little  more  than  one  half 
the  size  of  Kansas,  the  system  of  roads  run  southward  from 
the  town  of  Auckland  and  terminate  in  the  woods.  While 
those  from  Wellington  run  north  and  end  "no  place"  and 
local  jealousies  keep  the  two  systems  from  connecting;  to 
pass  from  the  two  principal  sea  ports  on  this  comparatively 
little  island  a  trip  of  eighty  miles  by  stage  would  be  necessary 
if  it  was  desired  to  go  by  land.  The  Southern  Island  has  a 
more  connected  system  and  private  owners  could  make 
this  a  profitable  piece  of  property  and  carry  freight  at  about 
one  half  the  government  charges,  if  left  alone  in  the  naming 
of  rates. 

It  would  disturb  the  sea  coast  trade  however,  and  build 
up  two  other  cities,  as  distributing  centers  which  are  now 
merely  filling  the  duties  of  country  towns. 

The  localizing  of  the  railroad  traffic  assists  in  maintain- 
ing socialistic  communities  in  New  Zealand,  and  as  the  set- 
tlers of  that  country  are  not  of  a  very  aggressive  mind  they 
do  not  know  that  they  stand  in  the  way  of  their  country's 
progress. 

The  government  control,  however,  prevents  a  profit  in 
railroad  operation  and  gives  expensive  and  poor  service  to 
the  business  interests. 

This  reflects  directly  on  the  value  of  everything  the 
producer  sells  as  each  cent  reduction  in  unit  charges  on  rail- 
road traffic,  places  that  cent  within  the  reach  of  the  producer. 
The  control  of  railroads  in  Australia  and  New  Zealand  shows 
that  the  thing  can  be  done,  but  that  it  is  very  poorly  done, 
and  at  a  loss  to  the  people. 

These  poverty  stricken  countries  have  nearly  three  hun- 
dred million  dollars  more  interest-bearing  debt  than  the  Unit- 
ed States;  their  per  capita  indebtedness  runs  from  $336.00 
in  New  Zealand  to  $380.00  in^  Queensland  while  in  the  Unit- 
ed States  it  is  $11.83. 

Australasia  each  year  shows  a  deficit  in  the  revenue, 


168  SOCIALISM  OR  EMPIRE. 

and  with  a  population  of  a  little  over  4,000,000  people  they 
pay  over  $40,000,000  in  interest  each  year. 

New  Zealand  is  a  cheap  country  for  everything  except 
transportation  of  freight  and  a  study  of  their  economic  con- 
dition impresses  me  with  the  fact  that  no  greater  punishment 
could  be  given  socialistic  agitators  than  to  send  them  to 
New  Zealand. 

These  agitators  may  think  it  freedom,  but  I  think  it 
slavery  to  be  obliged  to  shut  up  your  shop  at  a  certain  time, 
to  be  prevented  from  working  in  your  own  garden  but  certain 
hours  of  the  day  and  be  fined  if  you  work  for  yourself  on 
Sunday.  A  shiftless  man  who  merely  cares  to  exist  might 
like  such  a  place,  but  an  ambitious  man  would  soon  go  crazy. 

I  have  a  newspaper  friend  formerly  in  Denver  who  had 
read  of  socialism  until  he  had  "bats  in  his  belfry"  and  sold 
out  his  business  and  tried  New  Zealand.  He  is  in  San  Fran- 
cisco now  and  if  you  suggest  socialism  to  him  he  takes  it  as 
an  insult. 

I  have  said  that  the  only  thing  which  is  high  in  that  coun- 
try is  railroad  freight  rates,  but  overlooked  the  fact  that 
taxes  and  rents  are  beyond  reason.  The  great  debt  obliges 
heavy  taxation  and  it  is  reflected  in  the  rent  of  property.  The 
laboring  man  in  New  Zealand  pays  from  25  per  cent  to  33 
per  cent  of  his  wages  for  rent,  and  his  existence  is  as  near  a 
form  of  slavery  as  could  be  obtained  without  being  bought 
and  sold  under  the  hammer. 

His  slavery  is  to  the  state,  and  while  the  state  does  see 
that  he  gets  poorly  paid  work  to  do,  nevertheless  he  must 
work.  With  860,000  population  the  savings  bank  increase 
of  deposits  only  amounts  to  $21,000,000  for  the  whole  term 
of  ten  years  just  passed.  The  socialism  of  New  Zealand  now 
tends  to  keep  immigrants  away,  because  the  present  resi- 
dents want  all.  They  are  willing  to  divide  with  themselves 
but  not  with  the  rest  of  the  world  and  the  different  sections 
of  New  Zealand  do  not  care  to  divide  with  each  other. 

Socialistic  control  of  railroads  in  Australia  but  proves 
that  it  is  a  failure,  and  the  results  in  countries  trying  the  ex- 
periment, whether  in  crowded  Switzerland  or  the  undevel- 
oped island  continent  of  Australia,  go  to  show  that  private 
ownership  of  railroad  property  with  unhampered  competi- 
tion, produces  better  results  in  transportation  and  cheaper  ser- 
vice, than  where  the"people"own  or  control  theroads  themselves. . 


INDIA,  AFRICA  AND  JAPAN.  169 


CHAPTER.  XXV. 

RAILROADS  IN  INDIA,  AFRICA,  PHILIPPINES  AND  JAPAN. 

The  railway  system  of  British  India  has  more  mileage 
(25,930)  than  the  United  Kingdom  itself  (22,600)  and  the 
control  of  rates  by  the  government  through  partaking  in 
the  promulgation  of  definite  tariffs  is  much  more  absolute. 

The  maximum  rate  made  by  the  Board  of  Trade  in 
England  is  so  high  that  the  roads  never  feel  its  force,  while 
in  India  the  State  owns  and  operates  many  of  the  railways, 
and  the  railway  commission  by  making  definite  rates  on  the 
state  roads,  naturally  dictates  what  the  rate  shall  be  from 
all  competitive  points. 

The  competition  of  the  seaports  Howrah  (Calcutta),  Bom- 
bay and  Kurrachee  for  the  wheat  business  of  the  upper  Ganges 
country  has  unconsciously  created  a  constructive  traffic 
center  or  "basing  point"  in  the  Delhi  district,  900  miles  in 
the  interior,  and  the  accumulation  of  traffic,  and  centering  of 
the  same  over  definite  lines,  with  a  long  haul  has  enabled 
Indian  railways  to  carry  freight  cheaper  than  any  govern- 
ment controlled  railroads  in  the  world. 

Delhi,  the  grain  center  of  India  is  practically  the  same 
distance  from  the  seaboard  as  Chicago  and  has  four  lines  of 
railroad  reaching  the  coast,  at  three  different  ports.  The 
East  Indian  carries  the  grain  954  miles  easterly  to  Howrah 
(Calcutta),  the  North  Western  907  miles  westerly  to  Kur- 
rachee, the  Bombay  Baroda  and  Central  888  miles 
and  the  Great  Indian  Peninsular  981  miles  southward  to 
Bombay.  The  government  having  an  interest  in  some  of 
the  roads  forces  the  same  rate  to  each  of  these  seaports  re- 
gardless of  the  distance.  The  rates  are  pooled  and  inflexible 
and  a  rate  which  would  equal  2if  cents  per  100  Ibs.  on  grain 
has  been  maintained  from  Delhi  to  the  coast  for  practically 
fifteen  years. 

It  can  be  seen  that  the  only  competition  encountered  is 


170  SOCIALISM  OR  EMPIRE. 

between  the  ports  themselves  and  the  Steamer  lines  connect- 
ed therewith;  the  railways  through  a  pool,  not  being  allowed 
to  assist  themselves  or  their  customers. 

In  fair  years  the  private  owned  railroads  in  India  pay 
as  much  interest  as  the  roads  of  the  United  States,  and  the 
average  rate  per  ton  per  mile  is  5.68  pies  per  2240  Ibs.  equal- 
ing 0.85  cents  in  the  U.  S.  currency  per  ton  as  against  our 
rate  of  0.76  cents. 

The  low  rates  of  freight  in  India  have  been  brought 
about,  strange  as  it  may  appear,  by  the  competition  of  Ameri- 
can roads.  If  the  wheat  of  Central  India  was  to  compete 
with  the  American  product  the  makers  of  railroad  rates  had 
to  recognize  this  competition,  and  India  presents  a  rather 
unique  position  in  tariff  manipulation,  by  making  a  tariff 
on  coal  20  per  cent  higher  than  on  grain  through  this  action. 

While  the  Indian  railroads  charge  but  an  average  of 
.45  cents  per  ton  per  mile  for  grain,  the  greatest  coal  carry- 
ing road  the  East  Indian,  with  a  bituminuous  coal  tonnage 
amounting  to  over  5,000,000  tons,  charges  an  average  of  .54 
cents  per  ton  per  mile  on  this  class  of  freight,  a  rate  higher 
than  the  Lake  Shore  R.  R.'s  average  charge  on  all  traffic. 

In  the  United  States  our  coal  carrying  railroads  average 
but  little  over  .33^  cents  per  ton  per  mile  on  this  class  of 
freight,  so  that  the  low  average  rate  of  India  can  be  directly 
traced  to  American  competition. 

When  the  financial  transactions  connected  with  the 
operation  of  Indian  railroads  are  compared  with  American 
roads,  the  low  average  price  charged  in  India  is  not  impress- 
ive. In  the  United  States  66  3-10  per  cent  of  the  gross  earn- 
ings including  taxes  are  expended  in  operation  of  the  roads 
and  two  thirds  of  this  amount  is  paid  in  wages  to  employes, 
while  in  India  but  49  24-100  per  cent  is  paid  for  operation. 

When  the  American  laborer  knows  that  the  average 
rate  of  pay  for  a  native  Engineer  in  India  is  $13.33  per  month, 
the  Firemen  $5.00,  the  Conductor  $16.00,  the  Brakemen 
$6. 1 6  and  that  the  trackmen  receive  the  munificient  sum  of 
$2.00  per  month,  he  should  be  justified  in  showing  anger 
at  a  comparison  between  our  railroads  and  those  of  India. 
I  apologize  for  so  doing. 

The  cheap  operation  is  caused  by  the  low  scale  of 
wages  entirely.  Coal  is  cheaper  in  India  than  in  the  United 


INDIA,  AFRICA  AND  JAPAN.  171 

States  before  freight  is  added,  because  of  the  same  cheap 
labor,  and  all  railroad  supplies  are  cheaper  than  in  the  United 
States,  and  any  American  should  feel  ashamed  to  advocate 
Indian  methods  of  operation  of  railroads  in  comparison  with 
those  of  the  United  States. 

The  throttling  of  all  competition  through  government 
control  of  rates,  has  in  India  as  in  all  countries  where  the 
attempt  of  government  control  has  been  made,  prevented 
that  natural  improvement  in  service  or  equipment  accom- 
panying private  control  and  competition. 

The  first  class  passenger  fare  in  India  averages  2.14  cents 
per  mile  and  they  have  a  third  class  fare  of  0.38  cents  per 
mile;  but  if  the  average  American  was  led  up  to  one  of  these 
third  class  cars  and  offered  a  free  ride  he  would  look  at  the 
$13.33  Engineer,  and  the  $6.16  Brakemen,  and  size  up  his 
partners  in  the  journey  and  decide  to  walk  or  "dig  up"  a 
first  class  fare. 

With  all  this  advantage  (if  it  is  an  advantage)  in  wages 
paid,  the  Railroad  Commission  in  India  recommends  that 
the  State  owned  roads  be  leased  to  companies  to  operate. 
While  the  average  railroad  net  earnings  in  India  have  equaled 
those  of  the  United  States  at  times,  the  state  owned  roads 
have  averaged  $2,290,000  per  year  less  than  the  required 
amount  to  pay  interest. 

To  any  student  of  Political  Economy  this  difference 
in  results  is  easily  explained,  because  government  in  busi- 
ness is  expensive  or  a  failure,  and  this  example  is  but  one  of 
a  thousand  which  could  be  named.  There  are  times  when 
it  is  well  for  a  government  to  assist  in  the  construction  of 
railway  lines.  The  control  of  territory  and  military  ne- 
cessities present  emergencies  in  which  an  expenditure  of  gov- 
ernment money  serves  to  entrench  commercial  or  military 
positions,  but  there  is  not  a  single  instance  in  which  govern- 
ment control  of  the  business  handling  of  a  railroad  has 
helped  the  people.  The  United  States  and  several  states 
have  assisted  railroad  construction  and  there  is  no  instance 
in  which  this  assistance  has  not  benefited  part  of  the  people, 
and  the  sale  of  these  interests  to  private  companies  has 
been  a  benefit  to  the  nation,  because  it  withdrew  government 
influence  from  business  affairs.  The  results  in  this  country 
confirm  the  wisdom  of  such  a  policy,  and  no  comparison  can 
be  made  to  disprove  this  position. 


172  SOCIALISM  OR  EMPIRE. 

England's  investment  of  $47,500  per  mile  in  the  Uganda 
Railway  is  warranted  as  a  commercial  and  military  connec- 
tion between  Egypt  and  her  vast  possessions  in  southern 
Africa,  and  the  great  losses  yearly  made  in  its  operation  can 
partly  be  made  up  by  sale  of  land  and  increase  of  value  of 
territory  acquired,  but  after  its  construction,  it  would  be 
foolish  to  attempt  a  government  operation  of  such  a  line, 
if  a  company  of  private  citizens  could  be  found  to  operate  it. 

Its  present  average  gross  earnings  of  $780  per  mile 
gives  promise  of  future  value  but  it  never  can  be  made  to 
pay  by  government  officials. 

The  German  investment  in  African  Railroads  is  a  prac- 
tical loss  unless  the  government  turns  them  over  to  private  par- 
ties. While  the  last  reports  only  give  the  loss  as  $189,982 
in  opsration,  the  loss  will  only  increase  with  additional  mileage. 

This  control  of  territory  through  ownership  of  transpor- 
taiton  lines  fits  well  with  Imperial  Government.  In  1890 
when  General  Joubert  of  the  Transvaal  Republic  was  in  the 
United  States  I  had  a  long  talk  with  him  over  this  situation 
and  furnished  him  figures  on  a  line  from  Pretoria  to  Delagoa 
Bay.  He  wanted  the  line  constructed  by  American  and  Boer 
capital  and  offered  the  control  of  the  operation  to  the  Ameri- 
cans, if  they  would  furnish  but  40  per  cent  of  the  money  re- 
quired. 

Events  since  that  time  show  that  General  Joubert  was 
a  wise  man,  but  he  wrote  to  me  after  his  return  to  Africa  that 
the  espionage  of  England  was  so  close  that  the  deal  as  pro- 
posed could  not  be  consumated  and  that  he  feared  that  Eng- 
lishmen would  build  the  road  with  a  view  of  further  "fettering" 
his  country. 

England  thus  was  extending  her  imperial  control;  it 
was  part  of  a  comprehensive  military  plan  to  hold  territory. 
The  profit  or  loss  in  operation  was  hardly  considered,  and 
the  benefit  to  private  citizens  was  a  second  consideration. 

The  imperialistic  trend  of  thought  at  Washington  has 
allowed  our  Philippine  government  to  enter  into  contracts 
violating  every  American  principle  of  government. 

In  the  first  place  the  country  has  not  been  properly 
opened  for  American  citizens'  exploitation  and  ownership. 
It  has  been  held  "out  of  the  market"  with  a  show  of  mawkish 
sentimentality  about  some  future  Christian  reformation, 


INDIA,  AFRICA  AND  JAPAN.  173 

and  philanthropical  restoration  to  those  people  of  a  supposed, 
inheritance.  If  our  Department  would  withdraw  its  insular 
control  and  invite  our  citizens  to  enter  the  Phillippines  and 
take  possession  under  any  reasonable  location  rights,  those 
Islands  would  soon  become  one  of  the  most  prosperous  sec- 
tions of  the  world.  But  at  present  everything  must  be  log- 
rolled through  the  Island  government,  then  through  the  War 
Department,  and  all  business  is  throttled.  In  the  construc- 
tion of  railroads  in  the  Philippines  the  same  government 
interference  is  making  them  practically  an  adjunct  of  the 
imperial  government.  If  our  government  authorities  had 
opened  up  the  Philippines  something  in  the  way  it  has  the 
Indian  reserves,  so  many  adventurous  Americans  would 
have  entered  the  country,  that  it  would  not  need  a  govern- 
ment guarantee  on  Railroad  Bonds  to  float  them.  Capital 
would  have  been  anxious  to  enter  the  field  for  the  money 
that  was  in  the  transaction. 

If  the  Philippine  government  and  our  War  Department 
expect  the  Phillippino  to  open  up  and  develop  those  Islands 
so  that  a  railroad  would  pay,  their  confidence  in  Asiatic  char- 
acter is  child  like. 

The  Phillippines  do  not  need  teachers  or  soldiers,  nearly 
as  much  as  they  need  the  restless  pushing  American  citizen, 
who  rushes  in  where  a  military  firing  line  is  in  action,  if  there 
is  a  profit  in  the  risk,  and  if  it  were  fixed  so  that  he  could  get 
control  of  property  in  the  Islands,  he  would  soon  open  up 
the  great  natural  resources  known  to  exist. 

It  is  only  another  example  of  a  failure  of  government 
to  successfully  supervise  or  control  business  conditions. 

The  Iron,  Coal,  Timber  and  products  of  the  Phillippines 
would  soon  pay  the  United  States  the  purchase  price  the 
same  as  Alaska  has  done,  but  unless  it  is  opened  up,  giving 
every  man  a  fair  chance  for  profit  it  will  be  a  continuous 
expense. 

As  long  as  everything  has  to  be  done  by  "concessions" 
with  strings  of  government  to  pull  investors  or  locators  around 
to  the  views  of  some  government  official  there  can  be  no  pros- 
perity in  the  Phillippines. 

The  transactions  in  railroad  construction  thus  far,  and 
the  form  of  government  used  in  the  Phillippines  are  a  travesty 
on  every  American  principle. 

In  finishing  up  this  line  of  comparisons,   it  would  be 


174  SOCIALISM  OR  EMPIRE. 

incomplete  without  considering  the  new  nation  of  the  east, 
the  Yankees  of  the  Orient.  Japan  in  adopting  western  civi- 
lization has  made  great  headway  in  transportation  matters. 

Last  year  5,600  miles  of  railroad  had  been  completed, 
2,080  of  which  were  owned  by  the  government  and  3,520 
by  39  different  companies,  and  it  is  now  the  intention  of  the 
government  to  secure  all  of  these  lines.  As  Japan  does  not 
give  any  guarantee  to  personal  liberty,  the  Empire  can  do 
about  as  it  pleases  with  the  transportation  problem.  While 
passenger  fares  average  very  low  in  Japan  (but  .69  cents  per 
mile)  over  95  per  cent  of  the  passenger  travel  is  3rd  class 
and  less  than  one  third  of  one  per  cent  travel  first-class. 
Most  of  the  travel  is  on  mixed  trains  and  time  is  not  much 
of  an  object.  The  average  charge  per  ton  per  mile  is  1.03 
cents  and  with  these  low  prices  for  freight  and  passenger 
service  the  operating  expenses  do  not  average  45  per  cent 
of  the  gross  earnings.  The  cheap  service  in  Japan  is  the 
direct  result  of  extreme  low  wages  paid  to  labor. 

India  and  Japan  are  the  only  countries  where  govern- 
ment owned  or  controlled  railroads  furnish  freight  service 
at  anything  near  the  price  charged  in  the  United  States, 
and  it  is  only  through  the  payment  of  oriental  wages  that 
it  is  done.  The  railroads  of  Japan  have  cost  about  $42,000 
per  mile  and  are  profitable  ventures  as  through  the  low  wages 
paid  many  of  the  roads  earn  7  per  cent  on  the  investment, 
but  it  is  a  question  whether  such  a  condition  would  benefit 
the  people  of  the  United  States. 

Our  railroad  men  ^receive  from  ten  to  twenty  times  as 
much  pay  as  do  those  of  India  or  Japan  and  certainly  are 
better  citizens  with  a  brighter  future  and  are  more  happy  than 
these  underpaid  and  poorly  fed  yellow  and  brown  men  of 
the  East.  We  have  now  considered  the  results  of  govern- 
ment control  of  railroad  transportation  in  all  countries  of 
the  northern  hemisphere  which  have  any  considerable  mileage 
or  business. 

It  is  evident  that  government  control  and  operation 
mean  low  wages,  and  poor  service,  and  that  from  official 
figures  no  country  in  the  world  has  as  cheap  or  comprehensive 
freight  service  as  the  United  States. 


STREET  RAILROADS.  175 


CHAPTER  XXVI. 

STREET  RAILROADS. 

The  socialistic  trend  of  thought,  is  further  developed 
through  an  investigation  of  the  agitation  for  municipal  own- 
ership of  street  railroads. 

In  the  United  States  nearly  all  of  the  street  railroad 
systems,  are  owned  and  operated  by  corporations  and  it  is 
the  delight  of  the  socialist  to  decry  corporations  and  attempt 
their  destruction. 

There  is  no  denying  the  fact  that  a  franchise  to  operate 
a  street  railroad  on  the  streets  of  a  city,  to  a  certain  extent 
creates  a  monopoly ;  but  the  laws  in  several  of  our  cities  which 
oblige  one  street  railroad  company  to  allow  the  cars  of  another 
to  pass  over  their  tracks,  shows  that  the  monopoly  is  not  of 
such  a  character  as  to  prevent  competition  if  there  should 
chance  to  be  competitive  business. 

The  men  who  advocate  the  change  to  municipal  owner- 
ship are  politicians,  and  usually  do  so  with  a  view  of  further 
exciting  the  poorer  class  of  citizens  against  the  capi- 
talist. 

Their  arguments  when  sifted  down  to  fundamental 
points  are  first:  that  there  is  an  undue  profit  derived  by  the 
companies  at  the  prices  charged  and  that  the  "people"  should 
make  it  themselves,  and  second:  that  if  the  city  owned  and 
operated  the  street  railways,  cheaper  and  better  service  would 
be  given  them  than  is  given  by  the  corporations. 

Were  either  of  these  positions  tenable  a  reason  for  the 
change  might  exist,  but  such  is  not  the  fact. 

Neither  of  their  reasons  appear  to  consider  the  fact  that 
our  government  was  framed  on  the  theory  that  government 
should  do  no  business,  except  by  contract  with  citizens, 
and  that  it  is  repugnant  to  American  ideas  for  the  nation, 
state  or  city  to  compete  with  the  ventures  of  private  citizens. 


176  SOCIALISM  OR  EMPIRE. . 

Government  has  been  one  thing  with  the  people  of  the 
United  States  and  business  another ;  and  our  great  success 
financially  is  the  result. 

Up  to  the  present  time  but  little  headway  has  been  made 
through  this  agitation  and  about  the  only  municipal  ven- 
tures of  the  kind  as  yet  are  the  "subways"  of  New  York, 
Boston  and  Baltimore. 

While  New  York  has  over  $45,000,000  invested  in  a 
subway,  Boston  $8,434,000  in  subwrays  and  tunnels,  and  Balti- 
more $1,220,000,  they  lease  the  rights  to  companies  to  oper- 
ate instead  of  attempting  operation  themselves.  This  action 
is  clearly  within  the  province  of  a  city  government,  because 
they  really  have  increased  street  room  by  their  action  and 
rent  out  the  increased  space  at  a  fair  price  to  the  private 
companies.  As  the  companies  pay  enough  to  cover  interest 
charges,  the  citizens  receive  the  benefits  of  rapid  transit, 
without  the  necessary  political  pull  and  possible  scandal 
which  would  result  from  municipal  ownership. 

Chicago  is  the  only  city  of  prominence  which  has  ac- 
cepted the  socialistic  doctrine  of  municipal  operation  of  street 
railways;  although  the  vote  in  New  York  would  indicate 
its  dangerous  growth  in  that  city.  I  anticipate  that  in  all 
of  the  cities,  where  the  immigration  of  the  Latin,  Slav  and 
Hunn  has  been  excessive  the  tendency  will  be  the  same  way 

Chicago  presents  a  most  remarkable  example  of  what 
can  be  brought  about  by  persistent  agitation.  The  residents, 
of  that  city  always  have  been  inclined  toward  socialistic 
doctrines.  In  1851  they  voted  for  municipal  ownership 
of  water  works,  and  even  though  the  works  for  years  have 
been  a  scandal,  and  ordinarily  the  water  a  stench,  it  is  con- 
tinued, and  could  be  pointed  to  as  the  poorest  service  in 
the  United  States  to-day. 

In  the  street  railroad  controversy,  both  the  companies 
and  the  city  are  responsible  for  the  poor  service  given. 

It  appears  that  through  sharp  practice  on  the  part  of 
street  railroad  operators,  a  conflict  of  authority  in  franchise 
extensions  was  brought  about  between  the  state  and  the 
city.  The  State  having  extended  the  franchises  to  1958 
while  the  city  claims  that  franchises  on  100  miles  of  the  700 
miles  in  present  use  has  expired.  The  usual  law  suits  have 
resulted,  and  the  legal  decisions  on  the  different  phases  of 
the  question  would  fill  a  small  library. 


STREET  RAILROADS.  177 

The  result  was  abominable  service  by  the  companies. 
They  did  not  dare  go  to  the  expense  of  modern  equipment 
on  account  of  the  uncertainty,  and  by  this  action  the  com- 
panies only  fed  the  flame  of  opposition  so  that  there  was  a 
feeling  of  resentment  among  the  people  which  was  easily  led 
into  direct  antagonism. 

Having  by  a  Chicago  City  charter  provided  for  a  "re- 
ferendum" on  such  matters,  agitators  made  every  possible 
use  of  this  kind  of  reference.  Since  1899  every  campaign 
in  Chicago  was  decided  by  the  stand  the  candidate  took  over 
the  "ownership  of  the  streets"  as  it  was  put.  Municipal 
ownership  leagues,  and  rattle  brained  reformers  of  all  kinds, 
kept  the  thing  so  hot,  that  the  street  railroads  were  all  the 
while  between  "the  devil  and  the  deep  sea"  and  naturally 
gave  poor  service. 

In  the  spring  election  of  1905  the  Democratic  platform 
included  this  sentence;  "that  Chicago  follow  the  example 
of  enlightened  municipalities  of  both  the  old  world  and  the 
new,  and  take  immediate  steps  to  establish  municipal  owner- 
ship and  operation  of  the  traction  service  of  the  city." 

One  of  the  socialistically  inclined  judges  was  nominated 
for  Mayor  and  his  campaign  was  made  on  the  issue  of  munici- 
pal ownership  of  street  railroads,  and  he  was  elected. 

In  summing  up  the  results  of  that  campaign  Mr.  Grosser 
the  city  Statistician  of  Chicago  says:  "The  splendid  example 
of  the  beneficial  results  of  municipal  ownership  in  England, 
Germany  and  other  European  countries  did  not  fail  to  leave 
a  deep  impression  upon  the  voters." 

Since  that  election  the  Mayor  has  been  attempting  to 
purchase  or  arrange  to  build  street  railroads  in  Chicago. 
He  has  not  succeeded  and  it  is  well  for  the  city  that  it  is  so. 
His  election  was  the  result  of  anger  on  the  part  of  the  voters, 
and  all  men  know  that  they  are  generally  wrong  when  in 
anger. 

The  stories  told  of  the  benefits  of  foreign  municipal 
ownership  when  investigated,  appear  ridiculous.  The  man- 
ager of  the  municipal  controlled  street  railroads  of  Glasgow, 
when  called  to  the  City  of  Chicago  in  conference  told  the 
Mayor  that  it  would  be  impracticable  to  operate  the  Chicago 
Street  railroads  as  they  were  operated  in  Scotland. 

It  made  this  old  Scotchman  catch  his  breath,  when  told 
what  street  railroad  laborers  received  in  this  country. 


178  SOCIALISM  OR  EMPIRE. 

The  rate  of  fare  paid  in  Glasgow  is  about  the  lowest 
in  the  world,  but  the  street  railroads  are  only  73  miles  long 
for  a  population  of  about  1,000,000  people,  while  Chicago 
has  700  miles  for  2,000,000  people. 

The  Chicago  roads  are  built  with  semi-suburban  traffic 
in  view  and  long  rides,  while  in  Glasgow  they  are  principaly 
for  city  service.  The  Glasgow  rates  are  as  follows: 

6-1  o  mile i  cent 

2  3-10.  .  ' 2 

3  1-2 3 

4  1-2 4 

5  8-10 5 

7        6 

8  1-8 7 

9        8 

Now  the  average  rate  per  mile  paid  in  the  United  States 
on  electric  cars  is  i  2-10  cents  and  the  average  length  of  ride  in 
Chicago  is  about  five  miles,  while  in  Glasgow  it  is  but  two.  If 
the  American  average  was  used  in  comparison  with  Glasgow 
the  passenger  would  have  paid  1.86  cents  while  in  the  United 
States  it  would  be  2  4-10  cents  for  his  two  miles  travel. 

In  Glasgow  the  cost  of  operation  is  50  4-10  per  cent  of 
the  receipts  and  73  per  cent  of  this  amount  is  paid  in  wages 
to  laboring  men,  so  that  36  8-10%  of  the  1.86  cents  goes  to  the 
laborer,  or  but  .684  of  a  cent  per  passenger. 

As  the  street  car  motormen  and  conductors  receive  less 
than  $1.00  per  day  for  their  services  in  Glasgow,  if  they  were 
to  receive  American  wages  it  would  more  than  double  the 
amount  now  paid  them,  so  that  the  fare  would  be  1.86  plus 
.684  or  2.544-1000  cents  against  our  rate  of  2  4-10  cents  in  this 
country.  With  the  figures  developed  on  a  five  mile  ride 
the  figures  are  more  in  our  favor.  In  Glasgow,  to  ride  five 
miles  you  pay  5  cents  while  in  the  United  states  you  pay 
the  same.  If  they  paid  but  $2.00  per  day  to  their  motor- 
men  and  conductors,  they  would  have  to  charge  6  8-10  cents 
fare  as  against  our  5  cents  to  keep  even,  and  it  is  evident 
that  the  cheap  service  in  Glasgow  is  because  of  the  niggardly 
wages  paid  the  3,500  employes  and  that  the  motormen  and 


STREET  RAILROADS.  179 

conductors  really  make  up  the  difference  to  the  people.  If 
Glasgow  paid  her  employes  American  wages  her  street  rail- 
road would  lose  about  $4,500  per  day. 

Turn  to  Germany  and  you  find  the  same  conditions, 
only  worse.  The  socialistic  agitation  in  Germany  has  caused 
several  cities  to  go  into  the  street  car  business. 

Four  quite  large  cities  have  entered  into  this  class  of 
business  and  Frankfort  makes  it  pay.  That  city  cleared  a 
profit  of  $224,640.10  last  year,  while  Munich  lost  $32,747.03. 

Cologne  in  the  year  ending  1903  cleared  $21.51  and  in 
1904,  $130,816.06  and  between  these  extremes  several  small- 
er cities  have  fluctuated. 

Nearly  all  of  the  German  cities  operate  under  a  zone 
system  with  a  2  £  cent  limit  for  a  ride  of  from  i  £  to  i  4-5  miles 
in  different  localities.  Frankfort  while  charging  but  2\  cents 
for  \\  miles  or  under,  charges  5  cents  for  over  2  i-io  miles 
up  to  3  miles  and  i\  cents  per  mile  over  3  miles,  so  that  the 
actual  rate  in  Frankfort  is  higher  than  in  the  United  States 
for  any  ride  an  American  would  usually  desire.  In  nearly 
all  of  the  cities  there  are  still  cheaper  commutation  tickets 
for  laboring  men. 

To  the  unthinking  socialist  in  Chicago  this  2\  cent  fare 
for  short  distancs  looks  cheap  but  if  he  had  investigated  the 
longer  hauls  he  would  have  found  that  the  average  in  Ger- 
many would  work  up  near  to  the  average  in  the  United  States 
(it  is  less  than  i  cent  a  mile). 

But,  does  even  a  socialist  want  the  motormen  and  con- 
ductors on  our  street  railways  to  work  for  the  wages  paid 
these  men  in  Germany?  In  Cologne  the  motormen  receive 
from  $29.50  to  $37.50  per  month  and  conductors  from  $22.50 
to  $30.00  while  the  average  in  all  of  Germany  is  80  cents 
per  day  for  motormen  and  75  cents  for  conductors. 

Let  the  laboring  men  of  this  country  once  understand 
that  of  each  5  cent  fare  paid  in  the  United  States  i  86-100  cents 
goes  to  the  laborer  who  assists  in  operation  (not  construction) 
and  he  would  hesitate  about  demanding  that  these  wages 
should  be  cut  in  two  to  save  him  thirty  cents  per  month. 
But  this  is  exactly  what  is  done  in  all  of  these  countries  quoted 
by  the  honorable  mayor  of  Chicago,  and  is  the  principal 
reason  why  "cheap"  service  is  given. 

Another  is  the  fact  that  the  municipal  roads  do  not  pay 


180  SOCIALISM  OR  EMPIRE. 

taxes.  Massachusetts  has  estimated  that  10  per  cent  of 
the  revenues  received  by  the  Electric  Companies  are  paid 
in  taxes  in  one  way  or  another  so  that  \  cent  of  each  5  cent 
payment  goes  for  tax. 

But  the  greatest  saving  made  in  the  United  States  over 
that  of  Germany  is  in  time. 

Our  street  cars  run  on  the  average  three  times  as  fast 
as  those  of  Germany.  Those  people  do  not  know  what 
rapid  transit  means  and  the  man  who  goes  five  miles  in  an 
American  car  has  gained  thirty  minutes'  time  over  the  Ger- 
man traveler  in  the  same  form  of  conveyance.  What  is 
that  two  times  thirty  minutes  each  day  worth  to  a  man? 
Is  the  one  hour  at  home  instead  of  puttering  along  on  a  street 
car  worth  one  cent,  or  two,  or  anything? 

If  cars  were  installed  running  at  slow  speed  and  others 
at  fast  speed  the  proportion  that  would  take  the  slow  car 
is  something  as  yet  undetermined. 

However,  speed  costs  money  and  is  a  great  considera- 
tion. I  have  seen  foreigners  get  into  the  "Catalina  flyer" 
for  San  Pedro  from  Los  Angeles,  and  turn  pale  with  excite- 
ment when  the  motors  commenced  to  sing  and  the  car  fly 
along  at  fifty  miles  an  hour,  but  I  also  noticed  that  Ameri- 
cans crowded  for  seats  in  this  car  while  there  would  be  pie  nty 
of  room  in  the  car  that  had  preceded  it. 

The  American  wants  speed  and  is  willing  to  pay  for  it, 
and  the  boasted  street  car  service  in  Germany  would  set 
the  most  ordinary  laboring  man  in  this  country  crazy  after 
getting  used  to  American  ways,  while  the  business  man  would 
get  out  and  walk  to  cool  his  anger  at  the  delay. 

Even  the  countries  dominated  by  labor  organizations 
and  true  socialism,  hesitate  at  municipal  operation  of  street 
railways.  In  Sidney,  New  South  Wales,  the  city  owns  and 
operates  the  street  railway ;  but  one  of  the  prime  reasons  for 
such  ownership  was  the  fact  that  the  government  retained 
control  of  the  streets  and  the  city  though  their  railway  com- 
missions sought  to  gain  control  of  the  transit  lines  which 
they  desired. 

Today  the  street  railway  system  in  Sidney  maintains 
about  one  third  of  each  roadway  along  its  lines,  and  is 
independent  of  the  Municipal  council. 

The  divided  authority  forced  the  city  of  Sidney  into 


STREET  RAILROADS.  l8l 

the  position,  because  responsible  investors  would  not  take 
the  chance.  Melbourne's  old  cable  roads  and  Brisbane  and 
Perth's  newer  electric  lines  in  Australia  are  run  by  private 
corporations,  and  if  low  rates  were  to  be  charged  on  these 
roads,  it  would  present  the  spectacle  of  one  set  of  labor  unions 
imposing  on  another  a  low  scale  of  wages,  or  forcing  a  com- 
munity to  pay  for  the  rides  of  the  people. 

The  great  proportion  which  labor  receives  from  street 
railroad  receipts  has  a  direct  effect  on  the  fare.  If  the 
citizens  of  a  city  think  it  worth  while  to  seize  the  street  rail- 
road property  and  run  it  with  poorly  paid  labor,  or  at  a  loss, 
making  up  a  deficiency  through  tax,  it  is  well  for  them  to 
say  what  they  mean,  but  it  is  ridiculous  to  make  compari- 
sons with  Germany  or  England. 

There  is  not  a  city  in  England  or  Germany  in  which  if  wages 
were  paid  to  their  workmen  anything  like  on  our  American 
roads,  and  if  taxes  were  added  to  fares,  but  what  their  aver- 
age charge  for  "poor"  service  would  be  higher  than  we  pay 
in  this  country  for  good. 

The  2\  cent  short  rate  fare  in  foreign  countries  has  been 
held  up  to  an  angry  people  in  Chicago,  and  they  attempted 
to  destroy  the  corporations;  not  noticing  that  back  of  this 
red  flag  of  socialism,  with  cheap  street  railroad  fares  as  a 
center  piece,  there  crawled  the  slimy  dragon  of  political  cor- 
ruption and  socialistic  aggression  that  would  mean  disaster 
for  their  city.  Good  and  honest  citizens  were  carried  away 
by  the  statement  that  because  2\  cents  was  charged  in  these 
other  countries,  it  was  enough  here,  and  that  the  companies 
were  robbing  the  people,  although  two  of  their  traction  com- 
panies had  passed  into  the  hands  of  receivers  within  the  past 
five  years. 

The  whole  agitation  for  municipal  ownership  of  street 
railway  lines  is  nothing  more  or  less  than  socialism. 


182  SOCIALISM  OR  EMPIRE. 


CHAPTER  XXVII. 

INSURANCE. 

The  dispositon  shown  by  many  to  turn  over  to  the  gov- 
ernment power  not  intended,  was  remarkably  demonstrated 
when  the  insurance  scandals  were  brought  out.  Because 
an  investigating  committee  in  New  York  developed  the  fact 
that  some  insurance  officials  had  been  recreant  to  their 
trust,  had  voted  themselves  outrageous  salaries,  had  expend- 
ed money  of  their  companies  in  riotous  living  and  in  im- 
proper ways,  there  was  an  immediate  demand  on  the  part 
of  the  semi-socialists,  for  the  government  to  supervise  and 
control  insurance  companies. 

If  these  officials  have  done  wrong,  the  laws  against  em- 
bezzlement and  fraud  could  take  care  of  them,  and  unless 
they  have  been  guilty  of  some  clearly  illegal  act,  the  gov- 
ernment certainly  has  nothing  to  do  with  the  venture.  In 
the  committee's  attempt  to  blacken  the  character  of  the  in- 
surance managers  they  go  entirely  too  far. 

The  singling  out  of  a  few  bad  loans  from  the  thousands 
that  were  good,  with  a  view  of  discrediting  these  men,  was 
only  the  work  of  pettifoggers ;  because  in  the  nature  of  things 
some  mistakes  could  honestly  have  been  made,  in  handling 
so  many  loans  and  such  large  amounts. 

The  officers  of  these  institutions  had  handled  the  funds 
so  that  they  had  earned  more  than  the  estimates  of  the  actu- 
aries of  the  companies,  and  had  paid  every  obligation  in 
accordance  with  their  contracts  with  customers,  and  had 
succeeded  in  placing  the  Life  Insurance  Companies  of  the 
United  States  at  the  head  of  all  such  companies  in  the  world. 
The  spectacular  investigation  occurring  at  the  time  when  the 
people  were  being  worked  up  to  a  fever  heat  over  govern- 
ment control  of  everything,  by  the  whole  socialistic  propa- 
ganda, headed  by  an  unscrupulous  New  York  newspaper 
man,  caused  many  to  lose  their  poise. 


INSURANCE  CONTROL.  183 

Even  the  President  in  his  message  to  Congress  called 
attention  to  the  fact  that  he  had  previously  recommended 
that  "the  Congress  carefully  consider  whether  the  power 
of  the  bureau  of  corporations  (an  executive  adjunct)  cannot 
constitutionally  be  extended  to  cover  inter  state  insurance" 
and  repeated  the  recommendation  saying  "that  the  Congress 
should  also  consider  whether  the  Federal  Government  has 
any  power  or  owes  any  duty  with  respect  to  domestic  tran- 
sactions in  insurance  of  an  interstate  character"  and  argued 
that  because  the  Constitution  allows  congress  to  regulate 
commerce  with  foreign  nations  and  among  the  several  states, 
that  they  should  call  the  insurance  business  commerce  and 
regulate  it.  He  asked  that  this  power  to  regulate  be  left 
with  a  bureau  of  the  Executive  Department,  and  under  ex- 
ecutive control.  To  a  business  man,  life  insurance  is  a  pe- 
culiar form  of  commerce,  and  the  recommendation  very 
properly  died  in  the  committee  room. 

Life  Insurance  is  a  speculation  of^the  rankest  kind, 
because  you  expect  to  die  to  beat  the  game.  Nine  tenths 
of  the  people  who  insure  have  in  their  minds  the  idea  that 
they  "may"  die  before  the  time  they  would  be  called 
upon  to  pay  the  value  of  their  policy  in  premiums  and 
accrued  interest. 

The  companies  figured  such  an  average  that,  if  they 
were  able  to  get  a  large  enough  line  of  customers,  they,  under 
the  ordinary  run  of  things  would  take  in  more  than  they 
would  pay  out.  This  speculation  in  regard  to  the  length  of  life 
was  the  reason  for  the  great  investments  in  insurance  in 
the  United  States.  The  officers  of  the  companies  advertised 
life  insurance  as  a  "benevolence"  and  prated  of  their  benevo- 
lent institutions,  when  in  fact  they  were  business  ventures 
with  a  view  of  making  money,  and  it  developed  that  through 
margin  of  real  profit  and  actuaries'  figures  they  were  making 
a  "soft  snap"  out  of  the  companies. 

The  policy  holders  have  made  a  profit  over  and  above 
the  ordinary  use  of  money,  even  after  all  the  "high  jinks" 
large  salaries  and  bad  loans  are  considered. 

The  Equitable  after  the  change  in  officers  was  brought 
about,  developed  the  fact  that  the  Company  owned  about 
$450,000,000  of  securities  which  paid  an  average  of  4  3-10 
per  cent  so  that  this  company  could  lose  $1,350,000  per  year 


184  SOCIALISM  OR  EMPIRE. 

in  bad  debts  and  still  allow  the  stock-holders  to  receive  as 
much  as  the  highest  rate  paid  by  solvent  savings  banks. 

The  speculative  attempt  to  beat  the  "grim  reaper" 
through  insurance  was  the  reason  why  $500,000,000  per 
year  had  been  paid  in  to  the  regular  companies,  and  why  nearly 
twenty  billion  of  written  insurance  was  outstanding  in  the 
United  States.  It  was  made  popular  in  this  country  through 
success  of  the  companies  and  over  four  times  as  much  Life 
Insurance  is  outstanding  in  this  country  as  in  England,  fifteen 
times  as  much  as  in  Germany,  and  twenty-five  times  as  much 
as  in  France. 

Now  because  less  than  one  tenth  of  the  people  of  the 
United  States  who  entered  into  a  speculative  gamble  with  the 
Insurance  Companies,  find  by  investigation  that  the 
officers  had  taken  advantage  of  them  without  doing  so  in 
an  illegal  way  (only  by  a  species  of  "graft"),  what  possible 
business  is  it  of  our  government? 

If  the  policy  holders  do  not  like  their  companies  or  their 
associates  they  should  close  up  their  business  with  that  com- 
pany and  if  they  still  desire  to  gamble  in  insurance  go  to 
some  other  company. 

If  the  Congress  is  to  look  after  their  speculation  it  should 
look  after  mine  and  the  other  nine  tenths  of  our  people  who 
have  nothing  to  do  with  life  insurance. 

Why  should  I  and  the  millions  of  men  who  do  not  gamble 
in  life  insurance  be  called  upon  to  assist  in  paying  the  ex- 
penses of  a  bureau  supported  by  the  government,  with  a 
view  of  watching  the  investment  of  the  insurance  gamblers  ? 

I  never  insured  my  life  because  I  thought  the  chances 
for  making  money  were  as  good  through  my  own  management 
as  they  would  be  in  the  hands  of  these  insurance  speculators, 
and  while  willing  to  speculate  in  grain  and  stocks  and  gamble 
in  various  ways,  preferred  to  use  my  own  judgment  and  en- 
joy the  winning  and  sweat  out  the  loss  myself.  As  western 
men  say,  I  preferred  "quick  action"  and  was  not  attracted 
by  a  game  so  slow,  that  you  had  to  die  to  win  the  first  bet. 

For  the  government  to  take  charge  and  regulate  specu- 
lation in  insurance,  and  destroy  the  lotteries  at  the  same 
time  would  be  inconsistent.  It  would  be  paternalism  of 
the  rankest  kind.  It  is  advocated  by  all  socialists  because 
their  move  is  first  "regulate"  and  then  have  the  government 
go  into  the  business. 


INSURANCE  CONTROL.  185 

It  would  place  a  power  in  the  hands  of  our  Executive 
Department  so  great  that  these  companies  who  have  invest- 
ments of  thousands  of  millions  of  dollars  could  be  intimidaied 
by  a  designing  executive  into  almost  any  kind  of  political 
position. 

Any  regulative  control  of  investment  would  leave  the  in- 
surance companies  a  prey  to  executive  authority,  as  the  profits 
could  be  dissipated,  and  financial  regu'ations  made  which 
would  almost  be  a  confiscation  of  these  peoples'  money. 

Following  the  lead  of  the  Administration  the  several 
states  are  trying  to  see  how  far  they  can  go  in  the  "regulation" 
of  insurance  business  and  still  have  the  courts  support  the 
action  of  the  legislatures. 

A  state  having  issued  the  charter  can  consistently  pass 
laws  regulating  the  companies  it  has  brought  into  existence, 
so  long  as  that  regulation  does  not  interfere  with  the  earn- 
ing capacity  of  the  company  regulated. 

The  fourteenth  constitutional  amendment  is  a  complete 
estoppal  to  any  action  by  a  state  which  would  take  away 
from  its  citizens  any  acquired  property  rights. 

New  York  having  inaugurated  the  investigation,  has 
led  off  with  regulative  laws;  Ohio  and  Kentucky  have 
also  been  heard  from,  and  insurance  commissioners  all  over 
the  country  have  drawn  attention  to  themselves  by 
assuming  imperial  prerogatives  in  dealing  with  insurance 
companies. 

Some  of  them  are  supported  by  crank  laws  passed  by 
the  legislatures  of  several  states,  and  some  of  them  assume 
powers  not  vested  in  them  at  all,  following  the  lead  of  nearly 
all  executive  officers  in  a  republic. 

Some  of  the  recommendations  made  would  bankrupt 
one  or  more  of  our  great  insurance  companies  the  first  panic, 
and  panics  come  as  sure  as  wars  to  a  nation. 

The  Governor  of  New  York  in  his  recommendations  to 
the  legislature  practically  suggests  an  unconstitutional  regu- 
lation, and  excuses  himself  by  saying  that  Germany  does 
certain  things. 

He  overlooks  the  fact  that  through  the  war  of  the  Revo- 
lution and  a  written  constitution  the  citizens  of  the  United 
States  took  that  very  power  from  government. 


186  SOCIALISM  OR  EMPIRE. 

That  war  was  fought  against  this  paternal  or  mon- 
archial  control  of  business  affairs,  and  an  inquisitorial 
investigation  in  explicit  words  is  prohibited. 

Every  Executive  listening  to  the  voice  of  the  people 
(i.  e.  the  rattle  brained  socialists)  feels  called  upon  to  take 
charge  of  things  and  save  the  public. 

Their  conscience  should  rest  easy,  the  public  is  saved. 

These  insurance  companies  have  paid  all  of  their  obli- 
gations thus  far,  and  will  continue  to  do  so  if  let  alone. 

The  stockholders  and  parties  interested  have  made  the 
necessary  changes  to  protect  themselves,  and  the  states  or 
the  nation  only  complicates  the  situation  by  interfering  with 
their  business  management. 

How  ridiculous  it  would  be  for  a  state  or  a  government 
board  to  assume  to  regulate  the  investments  of  these  great 
companies. 

Officers  selected  or  elected,  usually  with  no  special  busi- 
ness qualifications  or  training,  assume  to  dictate  to  the 
managers  of  the  insurance  companies  in  regard  to  invest- 
ments. 

I  can  see  that  the  tendency  is  to  force  insurance  compan- 
ies to  withdraw  from  all  forms  of  loans  on  "quick  assets" 
and  oblige  large  loans  on  real  estate. 

The  Governor  of  New  York  said  "that  investment  in 
corporate  bonds  should  be  regulated  so  as  to  prevent  spec- 
ulation and  loss  from  an  attempt  to  float  doubtful  enter- 
prises" and  further  along  recommends  legislation  so  that  an 
"equitable  distribution  of  the  gains  of  the  company  to  the 
policy  holders  should  be  required." 

Such  a  law  if  passed  would  only  pass  up  to  the  Supreme 
Court  another  clearly  unconstitutional  interference  with 
the  business  of  private  citizens  on  the  part  of  a  legislative 
body. 

They  are  both  a  direct  interference  with  the  business 
management  of  these  companies,  and  are  beyond  the  powers 
of  legislation  in  this  country,  although  well  within  the  power 
of  the  executive  department  of  an  Empire. 

The  first  provison  that  I  have  quoted,  is  impracticable 
and  ridiculous  when  considered  in  a  business  way,  and  a 
state  that  would  pass  a  law  of  such  a  character  should  be 
obliged  to  stand  the  loss  if  any  occurred. 


INSURANCE  CONTROL. 

The  idea  of  passing  a  law  that  would  prevent  an  invest- 
ment in  corporate  bonds  which  was  not  speculative  is  a 
business  impossibility. 

What  government,  state  or  corporate  bond  is  in  exist- 
ence without  a  speculative  value  attached? 

The  bonds  of  the  United  States  have  fluctuated  in  value 
from  $400  to  $1,460  per  $1,000  in  my  business  experience. 
State  Bonds  by  millions  have  been  wiped  out  as  a  total  loss. 

England's  bonds  today  sell  at  less  than  87  per  cent  and 
Russian  at  70  per  cent  and  the  assignats  of  France  were  wiped 
out  of  existence  only  one  hundred  years  ago. 

With  the  States  and  the  United  States  entering  into 
an  attempt  to  control  and  regulate  corporate  action  in  the 
conduct  of  their  business,  assuming  the  rate  making  power, 
dictating  price  of  service  on  our  railroads  and  attempting  to 
have  the  Post  Office  Department  run  the  express  companies  out 
of  business,  there  is  not  a  corporate  bond  in  existence  in  the 
United  States  without  a  speculative  value.  The  managers  of 
these  companies  know  better  than  any  government  officer  the 
form  of  bond  more  profitable  to  hold,  and  any  inflexible  law 
regarding  investments  would  be  safe  today  possibly,  but 
certainly  would  end  in  disaster. 

The  recommendations  in  regard  to  investments  would 
oblige  these  companies  who  receive  four  per  cent  interest 
on  their  money  to  be  content  with  but  a  small  fraction  over 
3  per  cent  and  would  mean  a  loss  of  25  per  cent  of  interest 
revenue. 

Certainly  these  great  corporations  with  their  knowledge 
of  affairs  know  better  what  to  do  with  the  investments  of 
their  stockholders  than  the  governor  of  New  York  or  the 
legislature,  and  this  matter  is  beyond  the  legislative  function. 
-  The  second  recommendation  I  have  quoted  is  the  play 
made  to  the  grand  stand  of  agitators  as  being  in  the  inter- 
est of  the  common  people. 

It  is  sufficient  for  me  to  say  that  the  only  reason  for 
life  insurance  is,  first :  to  get  the  best  of  it  by  death  and,  second : 
that  the  investor  feels  that  the  company  can  do  better  with 
his  money  than  he  could  himself.  These  companies  in  hand- 
ling the  millions  entrusted  to  their  care  thought  a  reserve 
fund  advisable  and  had  maintained  a  large  fund  for  this  pur- 
pose. It  enabled  them  to  make  quick  loans  of  large  amounts 


188  SOCIALISM  OR  EMPIRE. 

and  they  made  money  for  the  companies  by  their  transac- 
tions. They  paid  every  obligation  to  the  policy  holders  and 
generally  were  successful  in  handling  these  quick  loans. 

By  the  use  of  this  money  several  great  combinations 
have  been  perfected,  and  in  several  instances  the  transac- 
tions were  more  or  less  speculative. 

This  second  recommendation  which  asks  the  legislature 
to  order  a  distribution  among  the  stockholders  of  the  greater 
part  of  the  reserve  is  an  interference  with  business  affairs 
entirely  unwarranted. 

The  government  obliges  banks  to  carry  25  per  cent  re- 
serve in  most  instances,  and  here  is  an  attempt  to  force  dis- 
tribution of  a  reserve  not  near  as  large. 

Some  of  these  companies  have  $500,000,000  invested, 
and  from  the  reports  made  the  investments  are  generally 
first  class,  but  is  it  business  sense  for  institutions  having 
such  vast  interests  to  tie  their  investments  up  in  real  estate 
loans  to  a  great  extent  and  distribute  their  quick  assets  held 
in  reserve  to  the  policy  holders? 

If  the  policy  holders  themselves  demand  such  a  thing, 
it  is  evident  that  their  money  in  life  insurance  is  a  proper 
investment,  because  they  did  not  know  how  to  handle  their 
own  money  in  a  safe  way. 

These  men  who  recommend  such  action  have  entered 
business  since  1873,  and  know  not  the  results  of  panic,  and 
if  these  insurance  reserves  are  distributed  to  policy  holders 
as  recommended,  when  the  time  comes  (and  it  will  come) 
that  confidence  in  the  value  of  securities  is  lost,  then  through 
the  lack  of  a  proper  reserve  which  could  be  sacrificed  and 
jettisoned  if  necessary  to  protect  these  vast  interests  without 
destroying  the  par  value  of  the  policies,  it  will  bring  failure 
to  the  company  itself. 

The  policy  holder  who  insists  on  distribution  is  exactly 
the  kind  of  incompetent  that  life  insurance  benefits  and  as 
he  had  turned  his  money  over  to  abler  men  to  handle  he 
should  hesitate  about  dictating  the  way  it  should  be  invested. 

These  companies  with  the  investments  made  as  care- 
fully as  the  mind  of  men  could  conceive; by  restriction  such 
as  is  proposed  would  find  themselves  tied  down  to  a  line  of 
policy  so  shaped  that  when  the  storm  of  panic  came,  their 
ship  of  finance  would  be  wrecked,  or  so  badly  damaged  that 
it  would  take  years  to  repair  the  loss. 


INSURANCE  CONTROL.  189 

The  people  of  the  United  States  do  not  need  to  read 
any  lessons  from  the  German  Empire  or  socialistic  Switzer- 
land. 

With  $19,273,675,201  life  insurance  in  force  in  the  United 
States  and  but  $1,320,163,685  in  Germany  it  would  go  to 
prove  that  we  knew  more  about  insurance  here,  and  made 
a  better  business  of  it  than  in  the  Empire  where  the  executive 
can  nose  into  every  class  of  business,  and  dictate  its  manage- 
ment. 

It  was  a  surprise  to  read  of  the  salaries  voted  to  the 
grafting  officials  in  some  of  the  companies,  salaries  three 
times  as  much  as  the  President  of  the  United  States  received 
to  men  who  could  only  be  considered  lucky  insurance  clerks, 
who  were  fortunate  in  getting  office,  but  it  was  the  business 
of  the  companies,  not  the  state  or  nation,  to  regulate  that. 

If  the  laws  regarding  embezzlement  or  fraud  are  insuffi- 
cient, change  them  covering  all  busines  conditions,  but  do 
not  make  special  legislation  regarding  business  methods  of 
insurance  as  it  is  inherently  wrong  from  our  stand  point  of 
government.  It  reflects  a  drift  to  socialism  or  Empire 
for  our  legislature  to  attempt  such  special  business  regula- 
tive legislation,  and  in  this  insurance  matter  they  might 
throttle  the  action  of  those  companies  at  a  critical  time  and 
destroy  the  value  of  millions  of  policies  outstanding. 

The  ignorant  man  naturally  rushes  to  government  for 
protection  against  every  ill,  and  I  do  not  think  the  policy 
holders  of  the  Insurance  Companies  demand  this  legislation, 
because,  certainly  they  can  read,  they  have  had  the  contract 
they  made  with  the  company  explained  to  them,  and  they 
evidently  know  enough  to  earn  the  premiums  to  be  paid, 
and  certainly  must  know  that  government  interference  would 
injure  rather  than  improve  the  value  of  their  policies. 

The  whole  legislation  is  only  another  example  of  a  so- 
cialistic attempt  to  have  our  national  and  state  government 
get  into  business. 


190  SOCIALISM  OR  EMPIRE. 


CHAPTER  XXVIII. 

POST  OFFICE. 

Nearly  all  of  our  semi-socialist  friends  refer  to  the  Post 
Office  Department  as  an  example  of  what  can  be  done  by 
public  ownership  of  utilities  as  they  are  pleased  to  call  certain 
lines  of  business.  The  constitution  provides  that  congress 
shall  "establish  post  offices  and  post  roads." 

Long  before  the  constitution  was  framed  this  power 
of  establishing  post  offices  and  post  roads  had  been  used  in 
the  colonies  for  the  purpose  of  giving  public  protection  to 
private  correspondence.  For  twenty  years  before  the  revo- 
ution  Benjamin  Franklin  acted  as  a  deputy  postmaster 
general  under  the  English  postal  regulations,  but  the  views 
of  Franklin  regarding  public  ownership  of  buildings,  civil 
service  rules,  the  employment  of  armies  of  government  em- 
ployes, and  attempts  to  do  business  in  competition  with  private 
citizens,  have  been  completely  disregarded.  Franklin  was 
opposed  to  the  government  doing  any  form  of  business.  In 
those  early  days  local  postmasters  regulated  the  rate  of  post- 
age so  as  to  pay  expenses  incurred,  and  it  was  not  supposed 
that  the  government  should  name  a  price  for  any  service. 

In  the  year  succeeding  the  adoption  of  the  constitution 
laws  were  passed  forming  a  Post  Office  Department  of  the 
government,  and  it  has  continued  with  growing  importance 
to  the  present.  However  up  to  the  year  1845  the  rate  of 
postage  charged  in  the  United  States  had  netted  a  profit 
to  the  nation,  and  it  never  was  the  intent  of  the  framers 
of  the  constitution  or  the  original  law  makers  that  the  gov- 
ernment should  render  this  service  at  a  loss  to  the  Treasury. 

The  passage  of  laws  regulating  rates  of  postage  elim- 
inating all  distance  from  consideration,  and  the  extension 
of  the  service  over  our  vast  territory  has  caused  a  yearly 


PO9TOFFICE. 

loss  in  operation  since  1866  of  from  $6,595.12  in  1882  to 
$14,931,688.45  in  1905  averaging  a  loss  of  $8,111,720.00  per 
year  for  the  last  twelve  years. 

The  executive  Department  has  gradually  changed  many 
important  features  in  the  administration  of  our  Post  Office 
affairs.  Ordinarily  by  securing  the  passage  of  laws  through 
congress, and  at  other  times,by  a  clear  assumption  of  authority. 

The  natural  growth  of  the  Post  Office  department  and 
the  additions  brought  about  by  this  official  "log  rolling" 
in  congress  have  placed  under  the  control  of  the  executive 
Department  about  285,000  employes  in  the  Postal  Service 
alone. 

The  control  of  this  great  army  of  appointees  is  an  effect- 
ive club  over  the  head  of  most  of  our  representatives  in  con- 
gress, and  the  ridiculous  civil  service  rules,  now  enable  an 
Executive  to  enforce  his  personal  will,  or  crawl  out  under 
civil  service  rules,  as  he  pleases  and  the  representative  who 
desires  to  assist  his  friends  is  made  a  laughing  stock.  Really 
anything  the  Post  Office  department  desires  can  be  made 
to  appear  as  a  demand  of  the  "people"  through  its  rami- 
fications, and  the  result  has  been  that  the  Post  Office  author- 
ities today  want  to,  and  do,  go  far  beyond  what  was  intended 
by  the  founders  of  the  Department. 

The  Executive  Department  uses  the  appointive  power 
as  a  method  of  forcing  administration  measures  through 
congress  and  the  actions  of  many  representatives  are  con- 
trolled in  this  way. 

While  the  deficiency  in  the  operation  of  the  Post  Office 
department  is  reported  as  being  $14,931,688.45  in  1905,  this 
great  loss  does  not  include  the  interest  on  the  investment 
in  government  post  office  and  Federal  Buildings  occupied. 

It  appears  that  there  are  200  first  class,  105  second  class 
and  21  third  class  post  offices  so  accommodated,  and  if  the 
interest  on  this  investment  was  included,  the  loss  would 
run  from  twenty  to  twenty-five  millions  of  dollars  last  year. 

If  it  had  been  the  intention  of  the  framers  of  our  govern- 
ment that  such  expenditures  were  to  be  made,  those  sticklers 
for  no  taxation  without  representation  would  have  provided 
that  the  expenditure  should  be  governed  by  population. 
They  would  have  arranged  that  if  Chicago  with  2,000,000 
population  had  a  $10,000,000  Post  Office  that  Podunk  with 


192  SOCIALISM  OR  EMPIRE. 

ioo  inhabitants  should  of  rights  have  a  $500,00  building, 
but  it  was  not  the  intention  that  the  United  States  should 
own  or  build  Post  Office  buildings  all  over  the  country.  At 
the  time  of  the  organization  of  our  Post  Office  Department 
a  contract  system  was  devised  which  enabled  American  citi- 
zens to  enter  into  contracts  with  the  department  to  trans- 
port the  mails  and  furnish  buildings  for  Post  Office  accommo- 
dation, and  what  is  left  of  that  system  is  used  today. 

The  object  of  the  establishment  of  Post  Offices  and  Post 
Roads  by  law  was  to  prevent  multiplicity  and  confusion  and 
protect  mailroads  from  robbery  or  delays  and  it  always  has  been 
made  a  serious  crime  in  this  country  to  interfere  with  the 
mails.  Mail  was  given  the  right  of  way  over  post  roads  and 
it  is  so  today.  Within  the  last  twenty  years  I  have  assisted 
in  tipping  an  unfortunate  freight  wagon  off  the  road  to  make 
way  for  a  coach  with  U.  S.  Mail. 

Until  the  encroachment  of  late  years  by  the  depart- 
ment it  was  plainly  understood  that  every  thing  was  to  be 
done  by  contract,  duly  advertised  and  entered  into  only  with 
citizens  of  the  United  States,  and  at  no  time  was  it  supposed 
that  this  governmental  department  was  to  enter  into  com- 
petition with  the  endeavor  of  private  citizens. 

The  construction  of  the  expensive  buildings  in  favored 
cities  is  not  for  the  best  interests  of  the  people,  and  is  evidently 
unfair  when  considered. 

It  cannot  be  said  that  these  buildings  furnish  better 
facilities  than  could  be  obtained  through  arrangements  made 
with  private  parties,  and  it  is  a  well  known  fact  that  they 
have  cost  from  two  to  three  times  as  much  as  private  citi- 
zens would  have  been  obliged  to  pay  for  the  same  space. 

The  government  purchase  of  ground  and  a  permanent 
fixed  location  for  a  Post  Office  frequently  has  proved  a  mis- 
take, but  through  ownership  of  the  property  changes  cannot 
be  made  to  meet  business  conditions.  As  the  buildings 
pay  no  tax  to  the  communities,  several  millions  more  could 
be  added  to  the  loss  of  the  people  through  this  ownership. 

The  Post  Master  General  in  his  last  report  in  consider- 
ing the  advisability  of  improvement  of  Post  Office  facilities 
in  New  York  and  other  cities,  frankly  says  "that  the  gen- 
erally accepted  practice  both  as  to  location  and  arrangement 
of  post  offices  in  these  cities  fails  to  secure  adequate  facili- 
ties." 


POSTOFFICE.  193 

In  the  report  for  last  year  it  would  appear  that  330  Post 
Offices  or  stations  were  accommodated  in  government  build- 
ings, while  67,801  were  taken  care  of  in  other  ways.  Elim- 
inating the  62,487  fourth  class  offices,  it  leaves  5,323  Presi- 
dential offices  where  quarters  were  rented  and  light  and  heat 
furnished  by  citizens  for  the  sum  of  $2,568,572.73.  This 
sum  is  charged  in  the  expenses  of  operation,  but  the  interest 
on  the  millions  of  dollars  invested  for  the  330  other  offices 
is  not  considered  at  all.  Now  comes  the  Post  Master  Gen- 
eral himself  and  says  that  these  great  expensive  buildings 
do  not  answer  the  purpose.  The  government  could  save 
millions  each  year  if  they  would  go  back  to  first  principles 
and  rent  the  quarters  required  for  this  business  from  citizens. 

The  apparent  cost  of  these  buildings  does  not  nearly 
represent  the  loss  to  the  people,  because  one  third  of  the 
ridiculous  "river  and  harbor"  appropriation  and  extraordin- 
ary expenditures  voted  by  congress,  is  through  the  "tickle 
me  I  tickle  you"  policy  of  aspiring  congressmen  who  endeavor 
to  secure  large  appropriations  for  buildings  in  their  districts. 

In  addition  to  the  palpable  wrong  in  favoring  one  cer- 
tain town  or  state  by  these  expenditures,  it  is  expensive  and 
creates  an  executive  adjunct  not  intended. 

The  drift  of  pubic  opinion  which  allows  our  government 
to  "do  business"  has  permitted  the  employment  under  salary 
of  21,778  letter  carriers  who  receive  20  per  cent  of  the  re- 
ceipts of  the  1144  post  offices  thus  served,  and  the  rural 
routes  lately  established  place  over  35,000  (last  year  32,055) 
more  on  the  salary  list  of  the  government,  whose  average 
wages  are  $2.00  per  day  and  receipts  41  cents. 

It  should  all  be  done  by  contract  under  proper  bonds 
furnished ;  as  it  is,  we  now  hear  of  labor  organizations  within 
the  government  service,  although  all  salaried  men  in  govern- 
ment employ  should  be  oath  bound  servants  of  their  country. 

The  Post  Office  department  would  never  have  been  a 
political  factor  if  the  intent  of  our  early  law  makers  had  been 
considered.  Their  idea  was  for  congress  to  establish  Post 
Offices  and  the  community  select  the  post  master ;  the  depart- 
ment advertising  for  bids  for  housing  and  heating  the  office, 
and  the  postmaster  being  under  bonds  to  select  his  assistants. 

If  districts  desired  local  delivery  it  should  have  been  at 
their  expense  and  not  the  general  public.  All  the  Executive 


194  SOCIALISM  OR  BMPIRE. 

department  should  do  was  to  see  that  everybody  gave  bond 
for  faithful  performance  and  to  prosecute  when  failure  occurred. 

At  present  the  Post  Office  department  is  transgressing 
on  the  first  principle  of  business  conduct.  It  has  taken  away 
from  the  Post  Masters  the  power  of  control  over  employes, 
and  the  most  vital  principle  connected  with  business  disci- 
pline is  violated.  I  know  that  civil  service  reformers  will 
say  it  is  necessary  for  the  department  itself  to  dictate  the 
employment  of  certain  subordinates,  but  these  men  usually 
know  little  of  business  management  or  are  advocates  of  a 
central  governing  power. 

I  know  that  if  the  Post  Masters  were  allowed  to  really 
have  charge  of  their  offices,  that  it  would  save  the  govern- 
ment ten  million  dollars  per  year.  The  whole  civil  service 
racket  and  the  employment  of  this  great  army  of  men  by  the 
government  instead  of  the  local  interest,  is  only  with  a  view 
of  keeping  a  dangerous  power  in  the  hands  of  the  Executive 
Department. 

I  would  not  accept  a  Post  Office,  and  assume  the  respon- 
sibilities of  its  successful  management,  if  I  could  not  select 
my  assistants  and  discharge  them  if  I  did  not  like  them. 
The  result  of  this  action  on  the  part  of  our  government  is 
creating  a  class  of  Post  Masters  who  work  for  the  "pay" 
and  really  are  becoming  pensioners,  instead  of  live  business 
factors  in  their  communities. 

The  nonsensical  notices  for  Post  Masters  to  have  nothing 
to  do  with  politics,  when  taken  in  conjunction  with  the  civil 
service  interferences  with  his  management  of  his  own  affairs, 
puts  a  Post  Master  in  a  peculiar  light,  as  a  man  among  men. 
On  top  of  all  this  for  the  President  to  put  him  in  a  civil  ser- 
vice class,  and  continue  him  in  office  indefinitely  regardless 
of  the  wishes  of  his  neighbors  practically  makes  him  a  pen- 
sioner. 

The  civil  service  rules  adopted  by  the  Post  Office  De- 
partment are  creating  a  class  of  citizens  as  fixtures  in  govern- 
ment employ,  and  every  American  citizen  down  in  his  heart 
knows  this  is  wrong. 

It  is  proper  for  the  men  trained  by  our  naval  and  mili- 
tary schools  to  give  their  life  to  their  country,  and  for  the 
country  to  keep  them  for  life.  The  necessity  for  drill  and 
discipline  requires  a  certain  term  of  service  for  our  army 


POSTOPFICE.  195 

and  navy,  but  it  is  worse  than  nonsense  to  assume  that  be- 
cause a  man  chanced  to  answer  a  lot  of  questions  success- 
fully before  a  board  of  cranks,  and  thus  got  into  the  employ 
of  the  government,  that  be  should  live  thereafter  off  the 
people. 

The  laughable  exceptions  made  in  the  Civil  Service  rule, 
where  one  high  official  in  the  Philadelphia  Mint  is  discharged 
because  he  insisted  on  keeping  a  stenographer  in  his  employ, 
and  a  warning  sent  to  another  Post  Master  not  to  take  part 
in  politics,  looks  strange,  when  I  know  of  other  post  masters 
so  busy  in  political  schemes  that  they  are  away  from  their 
towns  one  quarter  of  the  time  without  reprimand.  It  would 
cause  one  to  think  that  the  rules  worked  when  they  worked 
and  at  other  times  were  forgotten. 

This  civil  service  proposition  is  merely  one  of  the  ideas 
of  socialism  or  monarchy  and  is  creating  a  "class"  of  govern- 
ment employes  not  in  sympathy  with  our  institutions. 

It  is  all  right  in  an  Empire  or  Kingdom  but  is  not  accord- 
ing to  American  ideas.  The  Post  Master  General  in  his  re- 
port continually  efers  to  what  is  done  in  Monarchial  coun- 
tries, and  frequently  suggests  adoption  of  their  ways. 

In  the  last  report  he  suggests  that  $10,000  be  appro- 
priated, for  the  purpose  of  further  investigating  their  method 
of  doing  business. 

In  referring  to  the  possible  establishment  of  a  parcels 
post  in  the  country,  he  says  that  to  do  so  successfully,  would 
probably  involve  a  high  rate  of  postage  or  a  temporary  de- 
ficit, in  the  effort  to  compete  with  the  several  express  com- 
panies thoroughly  organized  for  handling  parcels  under  the 
"zone  system"  etc. 

Then  again,  he  says:  an  effective  domestic  parcels  post 
is  conducted  in  other  countries  and  says  "it  would  be  neces- 
sary to  adopt  rates  of  postage  that  would  meet  the  rates 
charged  by  express  companies." 

He  then  says  it  is  not  deemed  wise  to  enter  at  present 
into  this  competition  but  suggests  some  changes  in  postage 
on  third  and  fourth  class  matter,  that  would  start  the  com- 
petition which  is  not  wise  to  openly  attempt.  Last  year  it 
was  recommended  that  the  government  enter  into  the  "light 
country  express"  business  and  make  it  a  criminal  offence 
for  the  driver  to  carry  a  plug  of  tobacco  from  town  to  the 
country  farmer. 


196  SOCIALISM  OR  EMPIRE. 

Last  year  the  Post  Office  Department  carried  663,117,- 
128  pounds  of  second  class  matter  for  $6,186,647  which  cost 
$33,165,150  to  transport  and  the  people  pay  the  loss. 

A  parcels  post  system  could  be  established  which  would 
drive  our  express  companies  out  of  business,  and  the  loss 
in  the  competition  would  be  paid  by  the  unsuspecting  tax 
payers. 

The  postal  order  business  of  the  government  is  only  an 
entering  wedge  of  socialism  with  a  view  of  government  doing 
a  banking  business.  Last  year  our  banks  lost  the  exchange 
charges  on  $396,903,433  domestic  and  $47,576,027  foreign 
exchange  through  this  competition,  and  as  the  government 
charged  $3,211,644  exchange  on  the  domestic  and  $429,571 
on  the  foreign,  it  can  be  seen  that  the  banks  would  have  done 
the  business  cheaper  than  the  government  on  the  domestic 
and  that  the  government  was  cheaper  than  the  banks  on 
the  foreign,  so  the  net  result  of  our  money  order  business 
was  to  make  it  easy  and  cheap  to  send  money  out  of  the 
country. 

In  the  handling  of  registered  mail  for  which  an  extra 
charge  is  made,  and  which  is  in  fact  a  competition  with  ex- 
press companies,  it  develops  that  the  Department  lost  612 
packages  worth  $13,831.66  and  allowed  indemnity  of  $5,- 
310.97  and  paid  $1,432.41  last  year. 

When  the  people  compare  this  with  the  action  of  the 
express  companies  in  settlement  of  losses,  it  but  gives  a 
faint  idea  what  a  government  parcels  post  would  mean  in 
losses  to  the  people ;  outside  of  the  loss  paid  by  taxpayers 
in  operation. 

The  fact  is,  a  corporation  would  take  the  Post  Office 
department,  guarantee  delivery  of  letters  and  packages  or 
pay  damages  within  a  reasonable  time,  and  make  a  profit 
with  the  $152,826,585.10  receipts  last  year. 

Such  a  company  would  pay  rent  and  taxes  in  every  city 
where  the  congress  would  establish  Post  Offices  and  carry 
mail  over  every  post  road  required. 

Our  postal  arrangements  have  gone  so  far  that  a  change 
could  hardly  be  made,  but  every  additional  attempt  of  the 
Department  to  enter  into  competition  with  private  citizens 
in  any  way  should  be  blocked. 

Since  1872,  through  influences  brought  on  congress  by  an 


POSTOFFICE.  197 

aspiring,  reform  Post  Office  Department  official,  a  system  of 
paternalism  has  developed  which  puts  even  the  Empires  and 
Kingdoms  of  Europe  into  a  second  class.  Each  report  of 
the  Department  is  filled  with  a  long  account  of  how  the  Post 
Office  department  is  looking  after  the  money,  morals  and 
health  of  the  people,  through  their  so  called  fraud  orders  and  reg- 
ulations. This  is  only  a  form  of  paternalism  and  an  attempt 
to  have  the  government  attend  to  other  people's  business. 
While  most  of  the  highest  civilized  nations  countenance 
and  at  times  enter  into  a  lottery,  and  our  own  government 
adopts  the  lottery  scheme  in  distribution  of  land  taken  from 
Indians,  the  Post  Office  department  will  not  let  a  lottery 
advertisement  pass  through  the  mails. 

Guessing  contests  are  prohibited  and  any  speculative 
venture  on  the  part  of  the  people  is  tabooed  by  the  Depart- 
ment. 

Patent  medicines  have  been  decided  to  be  unhealthful 
and  their  advertisements  stopped  by  the  department,  on  the 
"say-so"  of  some  inspector,  and  a  senator  has  been  disgraced 
because  he  protested  against  a  Post  Office  order  regarding 
a  business  venture  and  accepted  money  for  his  services. 

With  plenty  of  money  a  "Bucket  Shop"  is  just  as  legiti- 
mate as  any  speculative  stock  brokerage  house  in  New  York, 
and  if  they  would  "hedge"  uncrossed  trades  daily,  would 
not  even  be  a  speculative  establishment.  The  American 
people  are  speculators  and  if  these  foolish  reforms  were  re- 
ferred to  a  vote  they  would  not  be  supported.  The  lotteries 
still  go  on,  but  the  money  is  sent  away,  and  the  people  still 
bet  their  money  and  win  or  lose  and  it  is  a  good  thing  for 
the  people  to  have  this  speculative  fever;  it  brings  wealth 
to  many  who  have  not  the  ability  to  earn  it  otherwise.  It 
certainly  is  none  of  the  government's  business  if  they  do  win 
or  lose,  and  the  whole  fraud  order  business  is  un-American 
except  when  it  protects  the  morals  or  health  of  the  people. 


198  SOCIALISM  OR  EMPIRE. 


CHAPTER  XXIX. 

TIMBER  AND  COAL  RESERVES. 

The  tendency  toward  paternal  or  socialistic  government 
is  remarkably  shown  in  the  reservations  made  of  public  lands 
by  the  Executive  department  since  1891. 

The  reputation  of  the  Adirondacks  as  a  fishing  and  hunt- 
ing ground  induced  the  state  of  New  York  in  1885  to  establish 
a  forest  reserve  in  those  mountains,  and  rightfully  turned 
it  over  to  the  Fish  and  Game  commission  of  the  State. 

The  parties  interested  in  the  reserve  fully  understood 
that  it  would  be  unpopular  to  let  it  be  known  that  this  great 
tract  of  land  was  to  be  held  as  a  hunting  and  fishing  ground, 
because  only  a  rich  man  could  afford  to  be  benefited  by  it. 

The  hunters  and  fishermen  began  to  talk  about  timber 
being  a  great  conservator  of  water,  and  to  their  surprise, 
so  called  scientists  took  up  the  discussion  and  convinced 
themselves  and  many  others  that  it  was  "the  thing"  to  save 
the  timber  lands  for  this  purpose. 

Others,  to  help  along  the  reservations,  argued  that  the 
timber  should  be  reserved  for  future  generations,  and  Mr. 
Pinchot  the  present  head  of  the  forestry  department,  takes 
this  view  quite  seriously,  claiming  that  the  timber  would 
all  be  used  in  a  few  years  at  the  rate  we  are  cutting.  The 
reservations  have  been  made,  giving  these  two  reasons,  when 
in  fact  there  is  no  real  sense  to  either  reason,  and  the  earlier 
reservations  were  only  intended  as  fishing  and  hunting  grounds 
for  sportsmen. 

New  York  has  purchased  about  1,500,000  and  Pennsyl- 
vania 600,000  acres  of  land  under  this  false  pretense. 

The  agitation  principally  engineered  by  Colorado  men 
induced  congress  in  1891  to  grant  permission  to  the  Presi- 
dent to  withdraw  public  lands  from  entry  by  private  citizens, 
upon  presentation  of  circumstances  which  in  his  mind  were 


TIMBER  AND  COAL.  199 

sufficient  to  warrant  it,  and  the  executive  department  has 
"run  wild"  of  late  years  in  this  "withdrawal"  of  public  lands 
from  location. 

In  the  Eastern  and  Southern  States  the  national  gov- 
ernment had  little  to  do  with  this  outrage  on  the  citizens 
of  States,  but  in  many  sections  of  the  west  the  result  of  this 
executive  action  is  disastrous. 

I  hardly  believe  the  public  understands  the  extent  of 
these  operations. 

Today  the  unappropriated  lands  in  the  United  States 
(leaving  out  Alaksa,  the  Indian  reservations  and  national 
parks)  amount  to  about  535,000,000  acres,  and  nearly  100,- 
000,000  acres  of  this  amount  is  withdrawn  from  private  own- 
ership through  executive  order.  Over  86,000,000  acres  are 
withdrawn  on  account  of  "forest  reserves"  and  10,000,000 
acres  of  coal  lands  have  been  reserved  for  future  generations 
and  the  geological  survey  is  now  examining  about  90,000,000 
more  acres  of  coal  land  at  the  instance  of  the  President  with 
a  view  of  withdrawing  it  from  location. 

When  the  gentlemen  who  built  the  Glenwood  Springs 
Hotel  in  Colorado  took  up  this  "Timber  Reserve"  cry,  and 
secured  the  enormous  timber  reserve  around  Trappers  Lake 
for  the  purpose  of  advertising  the  fact  that  great  hunting 
grounds  were  immediately  back  of  the  pleasure  resort,  they 
little  knew  the  damage  they  were  doing  to  the  State. 

Colorado  can  be  given  as  a  demonstration  of  results 
of  this  Executive  action.  Fifteen  million  acres  of  the  public 
domain  out  of  the  35,000,000  acres  of  land  as  yet  unappro- 
priated within  the  state  have  been  withdrawn  from  location 
and  it  is  proposed  to  set  aside  9,150,000  acres  more. 

The  13,071,712  acres  set  aside  as  timber  reserves  in 
Colorado  are  every  bit  as  good  land  to  support  population  as 
is  found  in  Switzerland,  where  three  million  people  live, 
even  if  they  do  not  grow  rich,  and  this  territory  taken  away 
from  Colorado  for  timber  reserves  alone,  is  26  per  cent  larger 
than  the  twenty-two  states  of  Switzerland. 

My  summer  home  is  at  Aspen,  Colorado,  and  the  timber 
reserves  cover  all  of  the  timber  around  the  town,  so  that  not 
a  stick  of  timber  is  used  in  the  mines  or  for  building  pur- 
poses that  has  not  been  marked,  measured  and  sold  by  the 
government. 

Inspectors  mark  the  trees  to  be  cut,  and  measure  up  the 


200  SOCIALISM  OR  EMPIRE. 

results  and  collect  from  two  to  three  dollars  a  thousand  feet 
for  merchantable  timber,  and  one  dollar  a  thousand  for  fallen 
timber. 

The  result  is  that  were  it  not  for  the  great  demand  from 
Manchuria  and  the  immediate  demand  from  San  Francisco 
on  account  of  the  fire,  it  would  be  cheaper  for  this  town  to 
buy  lumber  from  Oregon,  than  pay  the  prices  demanded  for 
lumber  manufactured  from  the  forests  in  sight. 

If  the  President  would  take  it  into  his  head  to  cut  off 
the  outlet  to  the  west,  which  fortunately  was  located  by  pri- 
vate citizens  before  this  nonsense  commenced,  one  would 
be  obliged  to  get  a  "permit"  to  leave  this  town  of  4,000  in- 
habitants, one  of  the  beauty  spots  on  earth. 

The  lumber  interests  of  the  Rocky  Mountain  States  are 
absolutely  under  control  of  the  Executive.  The  saw-millman 
must  have  permits  to  operate  from  the  government,  and 
must  do  only  what  the  Inspector  orders  or  risk  ruin  to  his 
business.  Inspectors,  following  the  line  of  all  executive  con- 
trol, will  not  allow  competition,  and  the  result  is  that  when  you 
find  a  sawmillman,  you  find  a  supporter  of  the  administration, 
and  the  government  of  the  United  States  is  the  greatest  oper- 
ator in  saw  logs  on  the  continent. 

Cattle  men  have  caught  the  ear  of  our  executive  who 
was  once  in  the  cattle  business,  and  have  perfected  leases 
for  grazing  purposes  on  part  of  these  reserves  at  a  ridiculous 
price,  and  the  timber  reserves  are  part  of  the  executive  do- 
main of  the  United  States  today,  as  much  as  the  crown  for- 
ests of  Russia. 

Without  considering  the  fact  that  our  nation  was  or- 
ganized with  a  view  of  preventing  government  from  competing 
with  or  controlling  business  management  of  private  citizens, 
it  is  evidently  unfair  to  have  the  government  lease  out  graz- 
ing land  at  10  cents  per  acre  and  assist  cattlemen  in  Colo- 
rado, in  competition  with  those  of  Ohio  and  Iowa,  who  raise 
more  cattle  and  pay  tax  on  their  land. 

The  serio-comic  side  of  this  outrage  appears  when  the 
facts  are  known. 

The  ambitious  hunters  and  fishermen  who  started  the  tim- 
ber reserve  stories,  unconsciously  started  a  couple  of  lies  that 
"ran  away  from  them."  Both  reasons  for  the  timber  re- 
serves are  fabrications  pure  and  simple.  The  assumption 
that  a  large  tree  conserves  water  is  a  myth. 


TIMBER  AND  COAL.  201 

In  the  Rocky  Mountains  the  great  snow  banks  which 
conserve  the  water  supply,  are  occasioned  by  sweeping  wind 
gathering  up  the  snow  and  banking  it  in  gulches. 

While  small  "second  growth"  timber  can  localize  snow 
drifts  about  their  roots,  large  timber  prevents  its  accumula- 
tion except  at  about  an  average  depth. 

In  the  spring,  if  on  a  high  mountain  with  much  snow  to 
contend  with,  the  place  to  find  the  ground  is  around  the 
roots  of  large  trees.  Two  reasons  exist  for  this  circle  of  bare 
ground  around  large  trees.  The  movement  of  the  sap  cre- 
ates warmth  and  the  tree  is  gathering  up  the  moisture,  and 
throwing  it  off  through  its  foliage,  the  same  as  a  boquet  in 
the  vase  dissipates  the  water  placed  around  the  stem. 

This  exudation  of  moisture  drawn  from  the  ground  cre- 
ates dampness  in  the  woods,  but  the  trees  are  great  vampires 
drawing  water  from  the  ground  itself. 

The  mountain  stream  may  run  through  a  wooded  valley 
but  if  followed  to  its  source  it  will  be  found  that  it  heads 
beneath  a  snow  bank,  which  had  drifted  into  a  gulch  and  by 
the  successive  heat  of  day  and  freeze  by  night  incident  to 
all  high  altitudes  turned  into  an  ice  pack. 

The  succeeding  floods  in  Nebraska  and  Kansas  which 
for  several  years  have  been  disastrous,  are  occasioned  by 
the  turning  of  the  soil,  and  the  floods  in  no  instance  origin- 
ated in  the  mountains.  The  waters  today  flow  down  our  moun- 
tain streams  with  the  same  volume  and  steadiness  as  they 
did  twenty-five  years  ago  before  a  stick  of  timber  was  cut 
on  the  western  slope  of  the  Rocky  Mountains. 

In  summer  days,  the  Roaring  Fork,  which  flows  back 
of  my  residence,  has  its  ebb  and  flow  as  regularly  as  the  tide, 
the  heat  of  the  sun  melting  the  banked  up  snow  on  the  bare 
peaks,  creates  a  flow  from  two  to  six  in  the  afternoon  and 
the  chilling  night  causes  the  ebb  which  culminates  in  the 
morning. 

The  snow  beneath  the  timber  in  the  mountains  practic- 
ally has  disappeared  long  before  the  high  water  occurs  in 
our  mountain  streams. 

The  floods  of  Kansas  and  Nebraska  which  threaten  to 
reduce  some  sections  of  those  states  to  primeval  swamp, 
originate  within  the  states  themselves,  and  timber  in  the 
Rocky  Mountains  has  no  connection  with  the  phenomenon. 


202  SOCIALISM  OR  EMPIRE. 

It  is  a  good  thing  to  plant  trees  in  prairie  states;  they 
draw  the  moisture  from  the  ground  and  pass  humidity  to  the 
air,  but  the  talk  of  timber  conserving  water  in  the  mountains 
is  only  a  theory;  it  is  not  a  fact. 

Arizona  had  the  first  wet  year  in  1905,  so  wet  that  it 
was  a  struggle  for  the  railroads  to  keep  in  operation,  and 
they  have  been  cutting  trees  for  twenty-five  years  from  the 
mountain  sides.  Timber  reserves  for  the  purpose  of  con- 
serving water  are  simply  "rot."  The  other  reason  has  less 
force  than  the  water  conservation. 

When  a  policy  in  the  United  States  is  developed  and 
succeeds  which  would  conserve  our  natural  resources  for 
future  generations,  we  had  better  stop  the  flow  of  immigra- 
tion to  our  shores. 

We  had  better  rewrite  our  Declaration  of  Independence, 
and  withdraw  the  invitation  to  the  downtrodden  and  op- 
pressed of  all  nations.  It  was  the  theory  of  our  government 
to  divide  public  domain  among  our  citizens,  and  we  prom- 
ised every  one  a  farm,  who  desired  to  be  a  farmer  and  in  case 
they  desired  to  own  a  timber  claim  or  mine,  the  choice  was 
given  them.  Prices  have  been  placed  on  Farm,  Timber, 
Stone,  Coal,  Saline  and  Mineral  land,  and  location  and  ap- 
propriation by  citizens  invited.  A  division  of  the  public 
domain  among  bonafide  citizens  was  the  foundation  of  our 
land  laws.  Diversified  ownership  and  payment  of  tax  is 
one  of  the  rocks  of  safety  to  which  our  government  is  moored. 

This  withdrawal  of  over  one  fifth  of  our  public  domain 
through  executive  orders  is  a  violation  of  faith  with  the  peo- 
ple, and  if  timber,  coal  and  iron  are  to  be  saved  for  future  gen- 
erations the  farms  should  be  reserved  as  well. 

But  the  saving  of  timber  already  grown  is  not  true  po- 
litical economy  in  the  United  States.  If  the  heavy  timber 
were  all  used  up  in  this  country  it  would  have  a  reflected 
value  in  improvements,  and  our  vast  system  of  transporta- 
tion would  equalize  values  for  future  use.  Alaska,  Siberia 
and  Upper  Canada  will  furnish  the  United  States  with  lum- 
ber for  all  time,  and  as  I  have  called  attention  already,  at 
prices  which  would  compete  with  the  timber  now  sold  by 
our  government  in  a  central  mountain  town  near  the  summit 
of  the  Rockies. 

One  of  the  reasons  for  Villard's  failure  in  Northern  Pa- 


TIMBER  AND  COAL.  203 

cific  was  the  criticism  that  no  one  could  be  induced  to  farm 
in  the  Dakotas,  because  there  was  no  timber  or  fuel  there; 
but  Mr.  Hill  delivers  lumber  to  those  farmers  for  six  dollars 
less  a  thousand  feet,  than  is  paid  in  the  Central  Mountain 
States,  in  locations  so  near  the  timber  that  the  sighing  of 
the  wind  can  be  heard  through  the  branches  of  the  forests. 

Private  incentive  of  American  citizens  is  a  safer  reli- 
ance than  government  control.  The  people  of  today  need 
not  look  out  for  the  future;  it  is  only  presumption  to  attempt 
it.  It  may  be  well  and  is  a  good  idea  to  have  a  forestry 
department  to  instruct  in  replanting  and  give  information 
regarding  improved  methods  of  tree  culture,  but  a  conserva- 
tion in  the  United  States  of  a  perfected  tree,  is  merely  a  senti- 
ment which  none  but  a  theorist  could  entertain.  The  yearly 
cutting  and  planting  of  crown  lands  in  Sweden  where  great 
forests  show  the  steps  of  growth  for  each  succeeding  year  and 
the  timber  culture  of  Germany  are  beautiful  examples  of 
what  can  be  done  in  tree  culture  but  as  36 £  per  cent  of  the 
area  of  the  United  States  is  still  timber  land,  enough  of  our 
territory  is  given  to  that  industry.  For  the  fiscal  year  end- 
ing June  3oth  the  state  of  Colorado  received  $12,541.79  from 
the  government  on  account  of  timber  reserve  receipts,  being 
one  tenth  of  the  collections  made,  but  during  that  time  the 
citizens  lost  fifty  times  that  amount  in  increased  prices  paid 
for  lumber  and  timber,  and  the  amount  of  loss  through  check 
to  immigration  and  future  citizenship  cannot  be  computed. 

Congress  appropriated  $1,000,000  the  present  year  to 
pay  salaries  of  rangers  connected  with  the  Forestry  depart- 
ment. Outside  of  their  duties  in  connection  with  the  sale 
of  logs,  and  driving  people  out  of  the  tall  timber,  they  are 
of  no  service.  In  case  of  forest  fires  they  notify  the  depart- 
ment and  necessarily  must  let  them  burn;  no  human  agency 
can  stop  them. 

To  show  that  the  trend  of  thought  in  executive  circles 
is  either  toward  socialism  or  paternalism,  the  action  of  the 
President  this  year  (1906)  is  conclusive. 

The  President  has  already  withdrawn  10,000,000  acres 
of  coal  land  in  the  west  from  location  through  an  executive 
order,  and  is  preparing  to  withdraw  90,000,000  more  and 
says  he  believes  by  that  action  he  can  prevent  coal  oper- 


204  SOCIALISM  OR  EMPIRE. 

ators  from  purchasing  government  coal  land  and  forming  a 
trust  and  raising  prices  of  coal.  His  idea  is  to  hold  the  coal 
land  and  have  the  government  lease  to  operators. 

The  President  proposes  to  hold  this  land  out  of  the 
market  until  he  can  induce  congress  to  change  our  land  laws 
and  authorize  the  government  to  go  into  the  coal  business. 

If  this  is  not  socialism  the  theories  of  that  sect  have 
not  been  explained. 

For  many  years  the  government  has  sold  coal  land  for 
$10.00  per  acre,  if  over  ten  miles  from  a  railroad  and  $20.00 
per  acre  for  land  nearer  transportation  lines.  It  can  be  seen 
that  this  price  is  from  8  to  16  times  as  high  as  is  charged  for 
farming  lands.  The  law  only  allows  a  citizen  to  make  one 
coal  location,  after  which  his  right  expires.  It  can  be  seen 
that  the  conditions  under  which  coal  land  is  sold  by  the 
government  are  practically  prohibitive  not  only  as  against 
trust  location  but  as  against  poor  men's  locations. 

The  amount  of  work  required  and  payment  to  govern- 
ment is  ordinarily  beyond  the  means  of  poorer  citizens. 

Companies  have  joined  together  and  induced  citizens 
of  the  United  States  to  locate  and  perfect  titles  to  coal  land, 
and  have  made  agreements  to  pay  these  citizens  for  their 
work  and  title  when  perfected. 

It  is  as  legitimate  to  do  this  as  to  buy  a  man's  farm  after 
he  has  perfected  title.  These  locators  after  legally  acquir- 
ing right  to  coal  land  have  the  same  right  to  sell  as  any  other 
citizen  would  have  to  dispose  of  personal  property. 

A  citizen  cannot  make  a  business  of  locating  coal  land 
and  selling  it,  because  his  one  location  ends  his  coal  rights. 

It  cannot  be  denied  that  many  citizens  have  made  their 
locations  with  the  distinct  view  of  selling  them,  however 
it  was  but  using  their  rights  as  citizens. 

If  the  President  thinks  coal  land  has  been  sold  too  "cheap" 
it  is  well  within  his  province  to  recommend  congress  to  raise 
the  price,  but  for  a  man  not  a  socialist  to  recommend  that 
the  United  States  retain  its  coal  lands,  and  "lease"  them  for 
the  benefit  of  the  people,  is  peculiar  to  say  the  least. 

Colorado  is  hit  hard  again  by  this  order  already  given, 
as  it  takes  2,442,000  acres  of  her  most  valuable  domain  out 
of  the  market,  and  at  a  most  inopportune  time,  and  the  pro- 
posed order  will  take  9, 1 50,000  acres  more. 

Six  hundred  and  twenty  two  thousand  acres  of  the  amount 


TIMBER  AND  COAL.  205 

already  "reserved"  is  in  northwestern  Colorado  to  which 
a  railroad  is  being  constructed  from  Denver.  One  of  the 
principal  reasons  for  this  railroad's  construction  was  to  trans- 
port the  coal  of  that  section.  It  cannot  be  supposed  that 
this  executive  order  will  do  more  than  "hang  up"  locations 
in  the  land  offices,  and  vested  rights  of  locators  will 
of  necessity  be  sustained  by  the  courts,  but  it  is  an  un- 
heard of  interference  with  the  business  of  a  community. 

The  intent  was  shown  to  withdraw  all  the  "easily  mined" 
coal  from  the  market,  so  that  the  government  could  get 
favorable  prices  from  "lessees"  and  compete  with  the  citi- 
zens who  had  joined  with  the  corporations. 

The  dipping  coal  lying  north  of  Bear  River  was  not 
reserved  but  the  great  level  lying  measures  south  of  the 
river  are  attempted  to  be  withdrawn  after  the  line  of  railroad 
had  been  located  to  make  a  market  for  the  mines. 

The  attempted  reservation  covers  one  of  the  greatest 
coal  deposits  in  the  world.  While  the  coal  is  in  the  "cre- 
taceous deposits"  where  nearly  all  of  the  coal  of  the  Rocky 
Mountains  is  found,  there  has  been  sufficient  pressure  to 
form  a  good  product,  and  at  one  point  I  have  seen  124  feet 
of  coal  in  successive  layers  nearly  all  merchantable. 

In  making  the  reservation  the  president  intimates  that 
by  doing  so  it  would  prevent  the  coal  from  falling  into  the 
hands  of  combinations. 

Rumors  of  suits  against  the  Union  Pacific  Railroad  are 
heard,  and  newspapers  talk  of  that  company  being  anxious  to 
get  control  of  vast  coal  deposits.  This  sounds  strange  to  me, 
because  three  years  ago  I  was  employed  to  investigate  the 
business  possibilities  of  the  Grand  Encampment  country  and 
Northwestern  Colorado  by  the  Union  Pacific  Railroad  and  in 
that  report  I  urged  the  importance  of  building  a  branch  road 
to  the  anthracite  coal  deposits  in  this  section,  and  my  rec- 
ommendation was  turned  down  by  the  management  on  the 
assumption  that  the  Union  Pacific  Railroad  had  all  the  coal 
they  wanted. 

This  reservation  may  be  a  good  thing  for  the  people  who 
might  live  three  hundred  years  from  now,  or  when  the  Utopian 
time  shall  come  when  the  socialist  government  runs  all 
the  business  of  the  country,  but  it  is  a  staggering  blow  to 
the  west  of  the  present  day. 

It  withdraws  millions  of  acres  of  valuable  taxable  pro- 


206  SOCIALISM  OR  EMPIRE. 

perty  from  the  market,  and  puts  that  much  more  "reserves" 
under  the  authority  of  the  executive  who  will  naturally  have  the 
"rangers"  drive  you  off  this  "imperial"  domain  with  as  much 
vigor  as  is  now  used  in  timber  reserves. 

Of  course  Iron  reservations  will  come  next,  and  soon 
this  "land  of  the  free"  will  be  allowed  to  breath  the  air  "if 
good"  but  will  be  restricted  as  to  quantity  if  government 
decides  to  use  air  ships  for  any  purpose. 

The  fact  that  40,000,000  acres  of  timber  land  in  the 
Phillippines  has  been  placed  in  the  same  kind  of  control 
as  the  forest  reserves  in  the  United  States;  requiring  "per- 
mits," "concessions"  and  what  not,  from  the  authorities 
before  anything  can  be  done,  is  the  main  reason  why  the 
great  timber  business  of  those  islands  have  not  been  devel- 
oped. Is  it  possible  that  they  are  attempting  to  "conserve" 
water  in  that  country  where  the  rain  drowns  the  Rocky 
Mountain  jackass  in  the  open  streets  because  he  fails  to 
put  his  head  under  shelter?  Or  is  it  the  intention  of  the 
government  to  keep  Americans  away  from  the  lands  they 
have  bought  and  save  the  timber  for  some  future  Philippino 
republic's  benefit? 

The  timber  of  the  Phillippines  could  in  five  years  time 
return  to  us  the  purchase  price  of  those  islands.  The  present 
generation  furnished  the  money  for  the  purchase  and  should 
receive  the  benefits  of  the  trade. 

If  American  citizens  were  given  but  "half  a  show"  in 
these  "possessions,"  in  one  year's  time  the  army  would  be 
in  the  way,  and  the  islands  on  the  road  to  great  prosperity. 


BANKS  AND  CURRENCY.  207 


CHAPTER  XXX. 

BANK  CONTROL  AND  CURRENCY  TINKERING. 

The  constitution  provides  that  Congress  shall  have 
the  power  "to  coin  money,  regulate  the  value  thereof  and  of 
foreign  coin,  and  fix  the  standard  of  weights  and  measures" 
and  this  authority  taken  in  conjunction  with  its  power 
to  borrow  money  on  the  credit  of  the  United  States,  is  as 
far  as  that  document  goes  in  granting  privileges  to  any  branch 
of  government  in  regard  to  money  matters. 

The  government  kept  well  within  its  province  in  this 
matter  until  the  civil  war.  An  attempt  had  -been  made  to 
organize  a  United  States  Bank  but  was 'defeated  at  a  time 
when  centralized  government  was  feared  by  the  people. 

During  the  civil  war  an  emergency  arose  which  required 
congress  to  provide  a  circulating  medium  as  all  of  our  coin 
had  been  drained  to  Europe  in  payment  of  balances  of  trade 
and  coin  being  at  a  premium  naturally  was  used  for  that 
purpose. 

The  right  to  borrow  money  was  used  by  congress  and 
the  "greenback"  promises  to  pay  were  issued  in  demoninations 
suitable  for  currency  purposes. 

To  make  them  "legal  tender"  the  Supreme  Court  was 
changed  through  appointments  made  by  the  President 
and  a  decision  given  to  that  effect. 

There  was  at  that  time  a  necessity  for  this  "forced  loan" 
from  the  people ;  and  as  this  manufactured  interpretation  of 
the  court,  answered  the  purpose  of  creating  a  paper  currency, 
based  on  the  "faith  of  the  government"  many  reformers 
and  cranks  became  advocates  of  this  form  of  paper  money 
inflation. 

Although  the  greenbacks  issued  are  a  plain  "promise 
to  pay"  the  sum  mentioned  on  their  face,  the  "greenbacker" 
assumed  that  the  note  thus  issued  was  the  money  itself. 


208  SOCIALISM  OR  EMPIRE. 

Their  lack  of  study  in  economics  did  not  enable  them  to 
see  that  while  congress  could  borrow  money  in  any  way  ap- 
proved by  the  courts,  that  these  notes  were  merely  expres- 
sions of  debt,  and  that  each  one  outstanding  was  a  danger 
to  the  treasury. 

The  socialistic  idea  that  the  government  could  create 
money  by  such  a  subterfuge  obtained  such  a  hold  on  the 
people  that  today  there  are  $346,681,016.00  of  this  class  of 
paper  outstanding  although  the  emergency  which  occas- 
ioned the  forced  loan,  long  has  passed.  For  fear  of  raids  on 
the  treasury  at  inopportune  times  congress  placed  back  of 
this  issue  of  promises  to  pay  $150,000,000  gold  reserve  to 
protect  the  treasury.  They  should  long  ago  have  called 
these  notes  in  and  paid  them  off. 

No  solvent  government  should  keep  such  an  obligation 
outstanding,  and  no  government  of  the  first  class  pretends 
to  do  so. 

The  same  emergency  which  brought  the  greenbacks 
into  existence  caused  laws  to  be  passed  allowing  banks  to 
issue  currency  based  on  bond  issues  of  the  government. 

While  this  move  made  a  great  demand  for  government 
bonds  at  a  time  the  government  needed  the  money,  and  also 
placed  the  issue  of  the  paper  promises  to  pay  or  paper  cur- 
rency if  you  please,  back  in  the  hands  of  private  citizens 
as  our  constitution  intended,  it  is  not  a  logical  or  safe  currency. 
It  is  only  a  form  of  paper  inflation.  What  is  the  difference 
between  our  national  bank  circulation  today  and  the  green- 
backs? The  Bank  circulation  has  a  paper  promise  to  pay 
on  the  part  of  the  government  back  of  it,  while  the  green 
back  has  43^%  coin  reserve  in  the  Treasury. 

The  additional  credit  of  the  National  Banks  of  issue 
to  my  mind  is  of  more  value  to  the  people  than  the  govern- 
ment guarantee.  If  the  government  by  law  would  require 
that  a  coin  reserve  be  held  by  banks  of  issue  to  protect  their 
circulation  and  deposits,  and  allow  banking  in  the  United 
States  to  be  conducted  on  true  business  principles  as  is  done 
in  all  other  enlightened  countries  we  could  have  "elasticity 
in  currency"  and  better  banking  service. 

It  would  allow  the  government  to  withdraw  from  the 
money  markets,  and  oblige  speculators,  and  moneyed  men  to 


BANKS  AND  CURRENCY.  209 

rely  upon  themselves,  and  not  fly  to  the  Secretary  of  the 
Treasury  for  relief  each  succeeding  term  of  dividend  pay- 
ments or  harvest  demands. 

As  it  is,  the  govenrment  is  drawn  into  every  grave  finan- 
cial condition  and  the  interests  nearest  the  Secretary  of  the 
Treasury  are  assisted  the  most. 

We  are  "wabbling"  around  the  socialistic  idea  of  our 
government  entering  into,  assisting  or  destroying  all  busi- 
ness conditions  so  violently,  that  in  case  we  get  a  real  lively 
active  "reformer"  in  the  Treasury  Department,  he  may  take 
it  into  his  head  to  change  the  system  of  government  relief, 
and  disturb  our  whole  system  of  bank  credits  possibly  bringing 
panic,  and  thousands  of  millions  loss  to  the  people.  On 
January  ist,  1906,  there  were  about  $535,000,000  National 
Bank  notes  outstanding  and  while  the  banks  held  about 
$318,000,000  gold  and  gold  certificates  and  $88,000,000  silver 
and  silver  certificates  and  $175,000,000  legal  tender  (green- 
backs) it  can  be  seen  that  if  the  greenbacks  are  reduced  to 
coin  (i.  e.  43^-  per  cent)  that  they  held  but  $481,000,000  of 
real  money  to  back  their  circulation,  with  over  four  billion 
dollars  deposits  protected  by  a  like  amount  of  loans  and  dis- 
counts and  $1,400,000,000  worth  of  bonds,  securities,  bank 
buildings  and  fixtures. 

The  above  figures  show  a  comparison  with  other  na- 
tions if  reduced  to  their  mode  of  figuring.  In  most  solvent 
nations  the  bank  note  is  a  representative  of  "coin"  and  the 
bank  must  be  prepared  to  pay  out  coin  upon  presentation 
of  the  note.  The  figures  given  show  ample  strength  in  the 
National  Banks  to  protect  both  their  circulation  and  deposi- 
tors, but  the  "coin"  used  is  far  too  small  for  safety.  The 
plan  of  issuing  National  Bank  Notes  based  on  government 
bonds  creates  a  false  condition  in  our  finances. 

It  creates  a  fictitious  value  to  our  bonded  debt,  and 
places  the  United  States  in  a  reverse  condition  from  that 
presented  by  true  political  economy,  viz.:  The  nation  must 
create  and  continue  a  bonded  debt  in  times  of  greatest  pros- 
perity, or  bring  about  a  disastrous  contraction  of  currency 
which  would  create  panic  and  tremendous  losses. 

The  growing  need  of  currency  in  the  nation  as  business 
increases,  created  a  demand  for  the  Panama  Bonds  so  far 
beyond  their  true  value  as  to  be  remarkable.  No  business 


210  SOCIALISM  OR  EMPIRE. 

man  thinks  that  the  credit  of  the  government  or  the  interest 
paid,  would  make  a  2  per  cent  bond  sell  for  104,  because  he 
knows  that  the  law  allowing  issue  of  currency  based  on  these 
paper  promises  to  pay  of  the  government,  is  the  sole  and 
only  reason  for  the  premium. 

If  our  currency  issues  could  be  separated  from  the  bond 
issues  we  would  approach  true  currency  reform,  but  the 
evident  desire  to  have  our  government  enter  into  all  kinds 
of  business,  keeps  up  this  farce  in  finance. 

Practically  all  of  the  bonded  debt  of  the  United  States 
is  back  of  the  currency  or  in  the  hands  of  trust  and  insurance 
companies.  A  so-called  capitalist  who  would  leave  his  money 
in  a  government  bond  today  should  have  a  guardian  appoint- 
ed, as  he  certainly  is  too  timid  a  man  to  be  allowed  to  handle 
his  own  affairs. 

This  scarcity  of  government  bonds  and  resultant  in- 
elasticity of  currency,  last  January  created  a  great  commo- 
tion in  New  York. 

The  Secretary  of  the  Treasury  suggested  that  a  law  be 
passed  giving  banks  authority  to  issue  in  currency  fifty  per 
cent  more  than  their  bond  holdings  with  a  tax  of  5  or  6  per 
cent  to  oblige  retirement  after  the  emergency. 

Mr.  Schiff,  the  banker,  said  at  the  time  "Mark  what 
I  say,  if  this  condition  is  not  changed  and  changed  soon, 
we  will  get  a  panic  in  the  country  compared  with  which  the 
three  which  have  preceded  it  would  only  be  child's  play." 

Mr.  Schiff  appeared  to  want  the  commercial  paper  in 
banks  made  a  security  for  currency  issue  instead  of  this 
palpable  inflation  recommended  by  the  Secretary  of  the 
Treasury.  Mr.  Gage,  a  former  Secretary  of  the  Treasury 
said  "I  agree  positively  with  Mr.  Schiff  that  the  monetary 
conditions  which  have  existed  in  the  country  for  the  last 
sixty  days  are  disgraceful  to  us  as  a  nation, ' '  but  he  appeared  to 
think  the  secretary's  recommendation  a  good  one  with  cer- 
tain modifications,  and  he  winds  up  with  the  expression  that 
the  correction  of  these  conditions  is  a  "high  public  duty  of 
the  President,  a  very  high  public  duty." 

The  President  of  the  Chase  National  Bank  said  "Cer- 
tainly something  has  to  be  done;  we  have  no  government 
bank  to  fall  back  on  and  some  way  of  improving  present 
conditions  must  be  found." 

Mr.  Vanderlip  of  the  National  City  Bank  said  in  regard 


BANKS  AND  CURRENCY.  211 

to  Mr.  Schiff's  remarks  "Undoubtedly  he  is  right  in  saying 
that  some  time  our  illogical  currency  system  will  cause  trouble." 

In  April  again  the  Secretary  of  the  Treasury  had  to  con- 
fer with  the  New  York  bankers  in  arranging  gold  imports, 
and  entered  into  competition  with  "Exchange"  houses,  in 
bringing  gold  from  Europe  causing  material  loss  to  private 
citizens,  arranging  for  the  gold  imports  through  a  secret 
plan  entered  into  with  the  National  City  Bank.  It  is  against 
our  principles  of  government  for  the  Secretary  of  the  Treas- 
ury or  the  President  to  be  a  party  to  any  such  transactions 
and  it  is  against  public  policy. 

It  can  be  seen  that  there  is  a  growing  idea  that  govern 
ment  should  be  depended  upon  in  these  cases  of   emergency. 
It  is  the  natural  result  of  congress  departing  from  consti- 
tutional ways. 

Congress  was  only  allowed  to  borrow  money  and  to  coin 
money  and  regulate  the  value  thereof.  It  borrowed  this 
$346,000,0000  and  issued  notes  for  it  (greenback)  during 
the  war  and  does  not  pay  it  back,  and  it  stopped  coining  silver 
money  at  the  instance  of  these  same  men  who  are  clam- 
oring for  relief. 

The  pressure  brought  on  congress  by  these  so-called 
"financiers"  stopped  the  constitutional  coinage  of  money, 
and  what  is  the  result? 

Since  1893  when  the  United  States  stopped  using  her 
own  production  this  country  has  sold  to  other  nations  about 
472,000,000  ounces  of  silver  for  about  $287,773,000. 

We  sold  this  bullion  at  a  time  when  balances  of  trade 
were  enormously  in  our  favor,  and  this  sum  was  only  an  ad- 
ditional amount  demanded  from  other  countries. 

While  selling  this  bullion  for  less  than  one  half  of  its 
coinage  value  the  United  States  through  its  National  Banks 
has  increased  its  paper  money  inflation  (bank  notes  based 
on  paper  bonds)  about  $386,000,000. 

If  congress  had  permitted  coinage  of  the  472,000,000 
ounces  of  silver  produced  by  American  mines,  we  would  just 
about  have  evened  up  our  currency  to  requirements  of  busi- 
ness without  this  "illogical"  condition  having  been  brought 
about.  If  the  government  had  kept  out  of  the  banking 
business  and  attended  to  its  functions  as  laid  down  in  the 
constitution  we  would  today  have  had  the  soundest  currency 


212  SOCIALISM  OR  EMPIRE. 

system  in  the  world  with  more  coin  reserve  than  any  two 
nations  on  the  globe.  The  banks  could  issue  currency  based 
on  "coin"  with  a  reserve  of  thirty,  forty  or  sixty  per  cent 
as  congress  should  devise,  and  no  form  of  panic  could  last 
longer  than  it  would  take  to  transfer  relief  from  point  to 
point. 

The  personal  responsibility  of  a  stockholder  as  exer- 
cised in  Scotland  or  Mexico  would  be  a  better  safeguard  for 
the  issue  of  emergency  currency  than  any  form  of  security 
selected  by  the  government. 

If  a  socialistic  revolution  should  sweep  the  country  or 
a  disastrous  foreign  war  occur  (and  both  are  probable) 
the  government  2  per  cent  bonds  would  soon  go  to  50  cents 
on  the  dollar  and  the  whole  currency  system  except  the  cer- 
tificates issued  on  coin  deposits  and  the  greenbacks  now  in 
use,  would  be  discredited,  and  the  base  on  which  National 
Bank  circulation  is  issued  would  be  cut  in  half. 

If  currency  was  called  in  to  meet  the  depreciation  the 
contraction  resultant  would  produce  disastrous  panic  at 
the  very  time  the  nation  would  need  funds.  Congress  de- 
parted from  its  constitutional  function  at  the  time  when  it 
assumed  to  purchase  bullion,  as  the  authority  to  coin  money 
and  regulate  the  value  thereof  never  intended  that  the  gov- 
ernment should  speculate  in  bullion  or  buy  and  sell.  It 
appears  that  this  was  one  of  the  first  of  the  socialistic  ideas 
engrafted  into  law  in  1878,  i.  e.  for  the  government  to  make 
a  profit  out  of  coining  money. 

If  a  coin  basis  was  adopted  in  this  country  we  would 
have  a  "logical"  currency  and  one  which  automatically  could 
be  expanded  or  contracted  as  business  may  demand. 

If  increased  demand  was  made  for  currency,  bankers 
could  purchase  bullion,  as  they  do  in  other  countries,  and 
increase  circulation ;  and  when  the  demand  was  over,  or  if 
they  feared  inflation,  they  could  sell  the  bullion  and  re- 
tire currency  in  proportion  to  sales. 

A  premium  of  but  a  couple  of  cents  on  a  dollar  would 
draw  sufficient  bullion  from  other  countries  to  enable  the 
increase,  and  the  losses  from  sale  would  be  far  less  than  the 
government  penalty  proposed  in  currency  increase  based 
on  securities 

In   addition   the   bank   control   could   be   regulated  by 


BANKS  AND  CURRENCY.  213 

negative  laws  without  the  government  having  anything  to 
do  with  the  business.  The  charter  of  state  or  National 
banks  could  provide  for  the  safety  of  the  people,  limits  of 
issue;  reserves;  inspection,  and  every  safeguard  now  given 
currency  issues,  with  criminal  and  personal  liabilities  and  safe- 
guards which  would  be  more  binding  than  at  present,  and 
do  it  all  through  negative  laws. 

Inspectors  could  see  that  the  laws  were  enforced,  and 
a  government  or  state  regulation  would  be  as  complete  as 
at  present,  but  the  farce  of  the  Secretary  of  the  Treasury 
and  the  President  being  appealed  to  about  every  three  months 
would  cease. 

If  the  bankers  did  not  secure  the  bullion  necessary  to 
place  coin  back  of  increased  demand,  it  would  be  their 
own  fault,  but  they  would  protect  themselves  the  same  as 
in  England,  France  or  Germany,  while  at  the  present  time 
the  government  must  "create"  a  fictitious  debt  to  enable 
necessary  increases. 

The  sale  of  Panama  bonds  was  nothing  more  or  less 
than  the  manufacture  of  paper  necessary  to  relieve  the  cur- 
rency situation. 

I  have  carefully  read  all  of  the  suggestions  made  by 
these  financiers  ( ?)  but  fail  to  see  where  one  of  them  suggest- 
ed coin  as  reserve  for  currency  issues  (the  only  logical  inter- 
national check  on  panic}. 

They  all  want  to  create  fictitious  money  promises  to 
pay,  based  on  some  other  kind  of  paper. 

Nearly  all  of  these  men  took  so  prominent  a  part  in  the 
silver  discussion  a  few  years  ago,  that  they  are  afraid  to 
mention  "coin"  and  acknowledge  its  need,  because  of  being 
charged  with  inconsistency.  In  case  any  of  their  recommen- 
dations are  followed  it  will  but  "pile  more  fuel  on  the  fire" 
of  the  next  financial  panic.  The  growing  business  and  popu- 
lation of  the  United  States  requires  an  average  increase  in 
currency  each  year  of  over  $100,000,000.  We  produce  about 
$65,000,000  worth  of  gold  yearly  and  have  been  selling  our 
silver  at  less  than  half  price  to  other  countries  and  for  thir- 
teen years  have  been  issuing  "fiat  currency"  in  the  form  of 
National  Bank  notes  to  fill  the  gap  ($386,000,000  increase 
in  13  years).  The  international  exchange  of  gold  between 
this  country  and  other  nations,  nearly  balances  itself  for 


214  SOCIALISM  OR  EMPIRE. 

this  term  of  years,  after  the  results  of  last  April's  specula- 
tion on  the  part  of  the  Secretary  of  the  Treasury  in  conjunc- 
tion with  the  New  York  Bank  to  which  I  have  called  atten- 
tion is  taken  into  consideration. 

The  currency  "makeshifts"  adopted  in  our  "possessions" 
by  the  government  furnishes  convincing  arguments  that  it 
would  be  better  for  the  nation  that  government  withdraw 
from  banking  and  currency  operations.  It  is  ludicrous  to 
hear  the  complaints  made  that  the  Panama  and  Phillippine 
dollar  (?)  dissappears  from  circulation,  and  the  innocent 
announcement  that  the  natives  must  "hoard"  the  silver 
currency. 

While  it  is  evidently  a  good  speculation  to  "hoard"  a 
fifty-cent  dollar,  with  from  52  to  56  cents' worth  of  bullion 
in  it,  and  a  prospective  advance  to  100  cents,  the  fact  that 
it  is  worth  more  as  bullion  than  as  coin  should  be  sufficient 
explanation  to  a  business  man  for  their  disappearance. 

Mexico  by  her  ill-advised  change  in  coinage  laws  has 
laid  the  foundation  for  hard  times  in  that  country,  through 
a  violent  contraction  of  currency. 

Her  5o-cent  dollars  are  disappearing  the  same  as  our 
Phillippine  and  Panama  dollars  and  as  they  use  this  coin 
back  of  part  of  their  currency,  it  means  a  necessary  contrac- 
tion of  currency  or  unsafe  paper  inflation. 

The  silver  market  now  is  ruled  by  the  breaking  loose 
of  Mexican  dollars  when  quotation  goes  much  over  65  cents 
per  ounce  and  a  drain  of  currency  is  going  on  from  Mexico 
that  already  is  reflected  in  the  industrial  unrest  heard  of 
there. 

The  violent  antagonism  worked  up  in  the  United  States 
against  silver  coinage  was  a  political  vagary  carried  to  an 
extreme,  and  true  economic  principles  were  not  even  con- 
sidered in  the  discussion. 

The  cry  of  "inflation"  made  by  the  very  men  who  now 
want  relief  to  the  currency  situation,  has  been  proved  to  be 
insincere;  because  they  have  "inflated"  our  currency  with 
as  many  paper  promises  to  pay  based  on  government  prom- 
ises to  pay  as  would  have  been  coined  if  we  had  used  our 
own  production  of  silver. 

The   automatic   increase   of   currency   based   on   bullion 


BANKS    AND    CURRENCY.  215 

production  or  purchase  would  have  created  a  "logical"  cur- 
rency while  now  the  greatest  banking  authorities  in  New 
York  declare  an  illogical  one  exists. 

The  wealthy  people  of  the  United  States  who  object  to 
silver  coin  and  who  have  induced  the  government  to  keep 
in  circulation  about  $145,000,000  of  one  and  two  dollar  bills 
in  this  country,  appear  to  take  delight  in  going  to  Europe 
and  some  way  manage  to  get  along  in  those  countries  where 
no  paper  money  of  less  denomination  than  $5.00  equivalent 
is  known. 

The  prejudice  is  entirely  occasioned  by  political  feel- 
ing and  prevents  the  distribution  of  this  vast  amount  of 
coin  among  the  people.  The  government,  except  in  cases 
of  a  forced  loan  (such  as  the  greenback) ,  should  have  nothing 
to  do  with  paper  currency;  it  is  the  rightful  province  of  the 
banking  industry  and  an  unwarranted  encroachment  on 
the  private  rights  of  citizens,  and  as  these  New  York  men  say, 
it  creates  an  illogical  condition. 

Until  we  place  our  currency  issues  on  a  coin  basis  the 
condition  will  continue  to  be  an  illogical  one,  and  there 'can 
be  no  safe  way  of  expanding  and  contracting  our  currency 
to  meet  the  trade  conditions. 

Coining  money  is  a  government  province,  but  the  issue 
of  notes,  and  the  nation  standing  back  of  and  participating 
in  business  conduct  of  transactions  purely  economic  was 
never  intended. 


216  SOCIALISM    OR    EMPIRE. 


CHAPTER  XXXI. 

THE  TREASON  (?)  OF  THE  SENATE. 

The  socialistic  writers  of  the  times  appear  to  derive 
great  satisfaction  in  attacks  upon  the  Senate  of  the  United 
States. 

One  young  man  made  quite  a  reputation  by  attacking 
every  prominent  conservative  member  of  the  Senate,  who 
had  conscientiously  tried  to  fulfill  his  duties  as  a  Senator, 
and  a  sensational  magazine  gave  his  attacks  great  prominence. 

The  writer  gave  evidence  that  he  did  not  know  why 
the  Senate  was  brought  into  existence  or  what  it  was  created 
for. 

He  assumed  that  because  its  action  was  conservative, 
that  it  was  not  doing  its  duty,  and  made  an  appeal  to  the 
people  that  it  should  be  changed  so  as  to  represent  the  in- 
terests of  the  "common  people,"  as  he  expresses  it. 

What  are  the  facts? 

When  our  government  was  organized  in  its  present  form, 
a  great  discussion  arose  over  what  should  vote,  i.  e.,  property 
and  the  taxpaying  interests,  or  the  common  people. 

There  was  such  a  disagreement  in  regard  to  the  class 
of  property  and  amount  which  should  represent  a  vote,  that 
in  the  end  the  present  system  of  universal  suffrage  was  adopted. 

After  agreeing  upon  universal  suffrage  the  framers  of 
the  constitution  tried  to  and  did  provide  a  check  upon  the 
action  of  the  "common  people,"  to  save  them  from  an  un- 
wise or  hasty  use  of  the  power  given  them. 

Mr.  Madison  explained  the  reason  for  the  formation  of 
the  Senate  or  second  branch  of  the  legislature  as  it  was  called, 
when  he  said:  "that  the  objects  are  two  fold;  first:  To 
protect  the  people  against  their  rulers,  and  second:  To 
protect  the  people  against  transient  impressions  into  which 
they  themselves  might  be  led." 

In  his  speech  in  the  constitutional  convention  he  said: 


THE  TREASON  OF  THE  SENATE.  217 

"An  increase  of  population  will  of  necessity  increase  the 
proportion  of  those  who  labor  under  all  the  hardships  of 
life  and  secretly  sigh  for  a  more  equal  distribution  of  its  bless- 
ings. These  may  in  time  outnumber  those  who  are  placed 
above  the  feelings  of  indigence ;  according  to  the  laws  of  equal 
suffrage  the  power  will  slide  into  the  hands  of  the  former." 

He  suggested  that  among  other  means  to  check  the 
encroachments  of  the  most  numerous,  "the  establishment 
of  a  body  in  the  government  sufficiently  reputable  for  its 
wisdom  and  virtue  to  aid  on  such  emergencies  the  prepon- 
derance of  justice,  by  throwing  into  that  scale." 

Mr.  Gerry  was  even  more  direct  when  he  said:  "The 
people  have  two  great  interests,  the  landed  interest  and  the 
commercial,  including  the  stockholders.  To  draw  both  branches 
from  the  people  will  leave  no  security  to  this  other  interest, 
the  people  being  chiefly  composed  of  the  landed  interest 
and  erroneously  supposing  the  other  interests  are  adverse 
to  it.  The  election  being  carried  through  this  refinement 
(i.  e.,  through  the  legislatures  of  the  states)  will  be  most 
like  to  provide  some  check  in  favor  of  commercial  interests 
against  landed;  without  which  oppression  will  take  place  and 
no  free  government  can  last  long  when  that  is  the  case." 

Another  reason  for  the  senate's  existence  was  the  fact 
that  it  was  feared  that  an  impulsive  House  of  Representatives, 
would  encroach  upon  the  rights  of  the  states.  Col.  Mason 
in  his  remarks  on  this  feature  said,  "The  state  legislatures 
ought  also  to  have  some  means  of  defending  themselves 
against  encroachments  of  the  National  government  and  what 
better  means  can  be  provided  than  giving  them  some  share 
in  or  rather  making  them  a  constituent  part  of  the  national 
establishment?" 

The  danger  of  one  class  obtaining  complete  control  of 
legislation,  was  fully  understood.  Mr.  Wilson  said:  "A 
single  legislature  is  very  dangerous;  despotism  may  present 
itself  in  various  shapes.  May  there  not  be  legislative  des- 
potism if  in  the  exercise  of  their  power  they  are  unchecked 
or  unrestrained  by  another  branch?" 

From  these  extracts  taken  from  remarks  made  when  the 
Senate  was  brought  into  existence,  it  will  be  observed  that 
the  present  socialistic  agitation  was  clearly  foreseen,  and 
that  the  senate  was  provided  as  a  definite  check  to  any  legis- 


218  SOCIALISM  OR  EMPIRE. 

lative  tyranny  attempted  by  the  House  of  Representatives 
as  against  the  commercial  or  stockholders'   interests. 

The  quotations  show  that  these  statesmen  fully  expected 
that  in  time  the  House  of  Representatives  would  be  controlled 
by  the  laboring  and  agrarian  element  owing  to  a  preponder- 
ance in  number. 

Mr.  Madison,  and  in  fact  nearly  every  member  of  the 
convention  expressed  frankly  their  fear  that  unwise  action 
on  the  part  of  the  people  was  the  greatest  danger  to  the  re- 
public, and  that  as  we  were  the  first  to  give  universal  suffrage, 
a  safeguard  should  be  prepared  which  would  check  socialistic 
or  communistic  aggression.  History  was  an  open  book  to 
them  as  it  is  to  us  today.  They  knew  that  the  destruction 
of  the  first  great  republic  was  the  direct  result  of  the  seizure 
of  the  power  to  originate  legislation  on  the  part  of  the  burgess 
of  Rome  swayed  by  the  oratory  of  the  "tribunes"  and  con- 
trolled by  a  mob. 

The  joint  degradation  of  the  Roman  Senate  by  executive 
usurpation  and  these  democratic  influences,  removed  the 
check  between  executive  ambition  and  unwise  legislation, 
and  disaster  followed. 

The  tyranny  of  Cromwell  was  more  fresh  in  their  minds 
than  in  those  of  the  present  generation,  and  these  patriots 
could  already  hear  the  rumbling  of  that  socialistic  volcano 
which  six  years  later  brought  forth  one  of  the  most  sicken- 
ing political  tragedies  enacted  in  the  world's  history.  Most 
of  the  framers  of  the  constitution  lived  to  see  the  day  when 
the  socialistic  mob  in  France  drenched  her  fair  plains  with 
the  blood  of  1,022,350  innocent  victims  (over  46,000  of  whom 
were  frail  women  and  innocent  children)  and  if  those  states- 
men had  thought  they  had  failed  to  protect  our  country  from 
such  a  disaster  they  would  have  amended  the  constitution 
and  corrected  the  error. 

The  present  agitation  in  favor  of  the  election  of  the 
senate  by  the  "people"  is  but  an  attempt  to  remove  the 
check  placed  by  the  organizers  of  our  government  to  prevent 
hasty,  unwise  or  oppressive  legislative  action. 

It  is  an  attempt  by  those  socialistically  inclined  to  get 
control  of  the  branch  of  the  legislature  which  was  intended 
to  protect  the  commercial  interests  of  the  nation. 

Mr.  Bryan,  one  of  the  foremost  agitators  for  the  removal 


THE  TREASON  OF  THE  SENATE.  219 

of  this  check  to  legislation  said  in  an  open  letter  to  the  voters 
of  Colorado,  Oct.  21,  1906,  "The  laboring  man  ought  to  re- 
member, too,  that  no  remedial  legislation  is  possible  until 
we  secure  the  election  of  Senators  by  direct  vote  of  the  peo- 
ple. If  the  senate  can  be  made  elective  then  the  gateway 
will  be  open  to  all  reforms." 

His  reforms  mean  a  change  in  our  constitutional  payment 
of  tax,  an  ownership  and  control  of  utilities,  a  seizure  of  the 
property  of  the  rich  for  the  benefit  of  the  state  and  a  limita- 
tion of  profit  on  capital  to  suit  the  views  of  the  "people." 

He  is  a  student  and  evidently  recites  the  orations  of 
Caesar  and  repeats  the  street-corner  talks  of  Claudius;  there 
is  no  new  thing  in  his  arguments. 

Human  nature  is  unchanged ;  it  is  the  same  as  it  was  two 
thousand  years  ago.  Grant  undue  power  to  one  faction  of 
the  community;  it  but  whets  its  appetite  for  more. 

If  the  socialistic  agitation  succeeds  in  removing  this 
safeguard  provided  in  our  constitution,  how  long  would  the 
courts  be  able  to  withstand  the  legislative  tyrannies  attempted? 

The  great  commercial  and  stockholding  interests  are 
as  important  to  the  progress  of  our  country  as  are  the  laboring 
or  agrarian  interests.  Theframers  of  the  constitution  expect- 
ed that  the  Senate  should  protect  these  interests  as  against 
the  aggressions  of  the  most  numerous  and  also  see  to  it  that 
the  integrity  of  the  states  was  preserved. 

The  Senate  was  not  expected  to  champion  the  rights  of 
the  "people,"  but  were  to  see  to  it  that  the  representatives 
of  the  people  did  not  pass  laws  which  would  create  hardship 
or  encroach  on  the  rights  of  the  property  owners. 

It  was  late  in  the  discussion  before  pay  was  provided 
for  Senators  because  it  was  expected  that  they  would  be  of 
a  class  which  would  not  expect  pay  for  public  service. 

As  a  counter-check  to  prevent  the  representatives  of 
the  commercial  interests  from  imposing  hardships  in  the 
way  of  tax,  it  was  provided  that  all  bills  for  revenue  should 
originate  in  the  House.  These  two  checks  go  together  in 
our  political  economy  and  it  was  expected  that  with  these 
provisions  no  tyranny  of  class  against  class  could  succeed, 
because  of  the  necessity  of  a  compromise  between  interests 
before  successful  legislation  could  be  perfected. 


220  SOCIALISM  OR  EMPIRE. 

It  will  be  found  that  the  constitution  and  the  first  series 
of  amendments  guard  every  interest  and  it  will  be  a  danger 
to  remove  the  protection  afforded. 

If  Senators  are  to  be  elected  by  the  same  class  as  the 
House  of  Representatives  and  represent  the  same  interests, 
why  not  abolish  the  Senate  and  increase  the  membership  of 
the  House  and  thus  remove  all  check  to  legislation? 

The  only  weak  point  in  our  political  system  is  the  failure 
to  have  our  state  senates  appointed  or  selected  in  some  other 
way  than  direct  election  by  the  people.  It  is  the  reason  we 
have  "freak"  laws  in  various  states. 

If  the  intentional  provision  in  our  constitution  which 
was  framed  with  a  view  of  protecting  the  wealthy  few  against 
the  increasing  many  is  removed  by  having  the  people  direct- 
ly vote  for  senators  and  thus  control  both  Houses,  it  creates 
the  very  danger  from  legislative  tyranny  which  our  fore- 
fathers hoped  to  provide  against. 

It  would  be  but  a  short  time  when  the  non-property- 
owning  class  of  voters  would  succeed  in  passing  laws  so  clear- 
ly against  the  interest  of  the  commercial  and  stockholding 
class,  that  Mr.  Gerry's  prophesy  would  come  true.  "Op- 
pression would  take  place  and  no  free  government  can  last 
long  when  that  is  the  case." 

All  wise  legislation  is  a  matter  of  compromise.  If  the 
people  attempt  to  pass  laws  which  cannot  pass  the  scrutiny 
of  the  Senate,  which  is  expected  under  our  constitution  t  o 
protect  property  rights,  the  laws  should  not  pass.  If  the 
action  is  so  radical  as  not  to  be  a  subject  of  compromise, 
it  would  be  a  disaster  to  force  it  through. 

The  attack  on  the  Senate  by  these  ignorant  socialists, 
because  of  its  attempts  to  attend  to  its  constitutional  duty, 
should  be  frowned  down  by  patriotic  citizens. 

However,  some  members  of  the  Senate  itself  have  been 
carried  away  by  this  agitation  and  several  demagogues  have 
been  successful  in  obtaining  seats  in  the  Senate  through  the 
agitation  which  demands  that  the  "people"  should  elect 
both  branches  of  the  legislature. 

The  man  who  takes  a  seat  in  the  United  States  Senate 
and  proclaims  the  fact  that  he  is  there,  representing  inter- 
ests in  antagonism  to  the  commercial  or  stockholding  interests 
or  the  Senator  who  would  allow  the  interests  of  his  state 
to  suffer  from  ill-advised  legislation  which  had  passed  the 


THF  TREASON  OF  THE  SENATE.  221 

House  of  Representatives  is  the  "traitor"  and  not  the  man 
who  stands  as  a  check  against  forms  of  legislative  tyranny 
or  executive  ambition. 

The  protection  given  owners  of  property  through  our 
form  of  government  has  helped  the  "common  people"  more 
than  they  could  help  themselves. 

The  laborer  has  been  enabled  to  receive  more  pay  in  this 
country  than  in  any  other,  and  the  security  assured  owners 
of  property  has  been  the  reason  he  has  had  well-paid  work 
to  do  when  he  desired  to  labor. 

Mr.  Bryan's  "predatory  wealth"  has  not  injured  the 
"common  people"  and  the  agitation  against  the  commercial 
interests  is  merely  one  of  the  phases  of  socialistic  "clap- 
trap." 

Laborers  and  farmers  should  know  from  experience 
that  followed  the  panics  of  1873  and  1893  that  their  pros- 
perity is  so  closely  allied  to  the  commercial  interests,  that 
if  they  suffer  the  whole  community  suffers. 

The  attempt  to  take  away  the  protection  to  commercial 
interests  is  as  suicidal  as  Sampson's  destruction  of  the  tem- 
ple. If  the  commercial  and  stockholding  interests  are  torn 
down  they  carry  along  with  them  every  money-making  in- 
terest in  the  country. 

This  effort  to  change  the  method  of  election  of  senators, 
is  only  one  form  of  the  attacks  on  our  representative  form 
of  government.  The  movement  for  "direct  primaries"  is 
of  the  same  character.  It  is  one  way  of  bringing  us  down  to 
a  true  democracy,  a  government  by  a  mob.  If  successful 
the  "tribunes"  with  the  loudest  voice  and  who  proclaim  the 
wildest  vagaries  will  attract  attention  to  themselves;  or  the 
newspapers  with  the  reddest  ink  and  most  glaring  headlines 
will  control  political  action  and  our  form  of  representative 
government  would  disappear. 

It  would  hardly  be  probable  that  conservative  repre- 
sentative men  would  be  selected  through  such  methods  for 
any  of  the  higher  offices  of  a  state.  They  would  be  unknown, 
and  it  would  leave  the  political  field  open  for  exploitation 
to  the  agitator  and  crank  or  the  designing  politician  who 
chanced  to  own  a  newspaper. 

Our  national  character  is  changing  through  excessive 
immigration  of  Latin  and  Slav  and  the  judicial  Anglo- 


222  SOCIALISM  OR  EMPIRE. 

Saxon  poise  is  being  replaced  by  a  mercurial  temperment, 
which  takes  kindly  to  the  ranting  demagogue  and  enthusias- 
tic newspaper  liar. 

Our  system  of  representative  government  carried  down 
to  the  primary  has  been  the  reason  of  our  political  success 
as  a  republic.  The  "refinement"  of  the  expressions  and 
desires  of  the  people  through  representative  conventions  of 
parties,  has  restrained  excesses  and  prevented  abuse  of  power. 

As  a  business  proposition  the  press  of  the  country  favor 
this  so-called  "reform,"  because  it  would  give  that  class  of 
property-owners  great  power  politically.  The  newspaper 
would  become  the  "tribune"  addressing  the  mob,  and  they 
could  make  and  unmake  political  candidates  for  any  of  the 
higher  offices. 

The  residents  of  Rhode  Island  might  know  of  some 
able  conservative  man  for  the  office  of  Governor,  because 
of  its  limited  territory.  But  what  man,  no  matter  how 
able,  could  expect  to  be  known  to  the  people  of  the  state 
of  New  York  or  Illinois  sufficiently  well  to  carry  a  majority 
in  a  general  primary  election? 

The  idea  of  these  agitators  appears  to  be  to  drag  us 
down  to  the  same  form  of  primary  which  proved  to  be  the 
death  of  the  Roman  Republic. 

A  reference  to  the  people  directly  of  questions  of  the 
gravest  importance  to  the  state,  without  using  the  political 
checks  which  would  induce  conservatism. 

Selections  made  in  such  a  manner  could  easily  bring  to 
power  officers  with  the  instincts  of  the  Directory  of  France, 
whose  tyrannies  against  the  owners  of  wealth  destroyed  all 
property  rights  in  that  nation,  only  a  little  over  one  hundred 
years  ago.  It  would  tend  locally  to  place  men  in  power 
as  reckless  of  consequences  as  were  the  leaders  of  the  ill-fated 
commune  of  Paris. 

It  is  the  hope  of  Socialism  to  destroy  representative 
government  but  it  is  the  political  road  that  leads  to  anarchy. 


CONCLUSION.  223 


CONCLUSION. 

The  publication  of  this  book  was  withheld  until  after 
the  fall  elections  of  1906  because  it  was  not  desired  to  have 
it  appear  to  be  an  argument  intended  to  influence  political 
action  during  a  campaign.  It  is  semi-political  in  character 
and  it  would  not  have  assisted  either  party;  although  the 
members  of  both  parties  should  consider  the  question  of 
governmental  interference  with  private  business  conduct 
with  great  care.  Thousands  of  voters  who  have  taken  an 
active  part  in  politics  failed  to  see  expressions  in  any  of  the 
party  platforms  which  represented  their  political  beliefs. 

It  developed  that  at  the  present  time  there  is  no  "con- 
servative" party  in  the  United  States. 

Each  one  of  the  parties  appear  to  be  vieing  with 
the  other,  in  an  attempt  to  get  nearer  the  beliefs  of  socialism 
than  its  opponent. 

The  leaders  who  framed  the  platform  expressions  appear 
to  have  lost  their  political  bearings. 

It  is  strange  to  see  in  a  democratic  platform  a  demand 
that  the  central  national  government  should  control  private 
business  ventures  owned  by  citizens.  It  is  far  more  strange 
to  see  in  a  democratic  platform  a  demand  that  the  national 
government  should  control,  regulate  and  possibly  purchase 
our  railroads,  which  have  been  chartered  by  the  several 
states,  and  owned  by  private  citizens. 

It  is  ridiculous  to  see  a  democratic  endorsement  of  civil 
service  reform,  which  already  has  created  a  "class"  of  office 
holders  four  hundred  thousand  strong. 

Recommendations  such  as  these  would  cause  Jefferson 
to  disclaim  the  title  of  democrat,  and  a  demand  that  the 
central  government  take  control  of  the  paper  issues  of  currency 
instead  of  leaving  that  function  to  banks  owned  by  citizens, 
should  cause  the  ghost  of  Jackson  to  haunt  the  framer  of 
such  a  resolution. 

The  natural  concentration  of  power  in  the  hands  of  an 


224  SOCIALISM  OR  EMPIRE. 

executive  which  these  demands  would  bring  about  would 
but  repeat  the  mistake  of  the  democracy  which  made  a  Caesar 
possible.  Can  it  be  that  the  democrats  have  learned  nothing 
in  two  thousand  years  and  now  wish  to  repeat  the  error  that 
destroyed  the  first  republic? 

Representative  democrats  should  know  that  these  things 
are  not  democratic  principles,  and  that  it  is  only  inserted 
in  their  platforms  to  catch  the  votes  of  imperialists  or  socialists. 

It  might  be  in  accordance  with  democratic  principles  to 
advocate  "the  election  of  senators  by  the  people,"  to  declare 
for  the  "initiative  and  referendum,"  or  for  a  primary  election 
law  that  would  allow  the  people  to  directly  make  selections 
for  office  without  the  intermediary  of  representatives;  but 
these  other  reforms  represent  views  in  antagonism  to 
democratic  theory.  Having  "reformed"  one  great  republic 
out  of  existance,  democrats  should  have  a  care  about  funda- 
mental reforms. 

From  appearances  the  conservative  democrats  have 
been  "spewed  out"  of  their  party,  as  Mr.  Bryan  expresses  it. 

The  tendency  and  desire  of  democratic  orators  have  been 
to  create  the  impression  that  their  party  represents  the  man 
without  money,  and  one  branch  of  that  party  attempts  to 
create  popularity  by  inciting  the  indigent  against  the  rich. 
Madison  in  the  constitutional  convention  frankly  stated  that 
with  universal  sufferage  this  class  of  voters  would  out-number 
the  other  and  it  is  good  political  economy  for  some  party  to 
guide  that  class  of  voters  if  it  is  done  through  representative 
selections  and  in  American  ways. 

In  politics  as  well  as  legislation  it  is  well  to  have  an 
opposition;  it  creats  a  balance-wheel  in  our  governmental 
machinery. 

Unfortunately  at  the  present  time  the  socialistic  trend 
of  thought  drifts  parallel  to  democratic  beliefs  and  the 
democratic  party  has  adopted  many  socialist  heresies  in  the 
hope  of  attaching  that  element  to  it. 

It  would  be  better  for  the  believers  in  the  theories  men- 
tioned if  they  would  join  together  either  as  socialists  or  demo- 
crats, and  release  the  conservative  element  now  associated 
with  the  democratic  party. 

In  New  York  to  a  certain  extent  this  was  done  in  the 
campaign  just  passed,  only  a  complication  brought  about  by 
unwise  republican  action  created  peculiar  conditions. 


CONCLUSION.  225 

The  untried  party  leaders  of  the  republican  party  did 
as  strange  things  as  the  other  party  attempted. 

How  ridiculous  it  appears  to  see  a  demand  for  an  election 
of  senators  by  the  people  or  a  primary  election  law,  intended 
to  destroy  representative  government  in  a  republican  plat- 
form ;  because  the  framer  of  such  a  resolution  is  a  democrat  and 
does  not  appear  to  know  it.  He  is  as  much  a  freak  as  a  high 
tariff  democrat  or  a  free  trade  republican  would  be. 

He  is  chopping  away  at  the  base  of  a  republican  form  of 
representative  government,  which  was  intended  to  check  the 
encroachment  of  class  against  class  through  unwise  political 
or  legislative  action. 

Again,  for  forty  years  either  the  intuitive  or  expressed 
knowledge,  that  the  democratic  party  hoped  to  represent 
the  poor  in  antagonism  to  the  rich,  has  had  the  effect  of  driving 
the  greater  portion  of  the  commercial  element  into  the  re- 
publican party.  The  commercial  and  stockholding  classes 
have  assisted  the  republican  party,  and  it  cannot  be  denied 
that  the  party  has  protected  these  interests.  The  party  did 
not  protect  their  interests,  as  against  the  poor,  because  the 
protection  extended  has  created  the  greatest  prosperity,  and 
enabled  the  laborer  to  receive  better  pay  than  in  any  other 
country.  So  that  this  protection  has  been  the  greatest 
assistance  our  poor  people  have  received.  But  in  the  last 
campaign  the  party  through  unwise  leadership  advocated 
reforms  which  of  necessity  will  antagonize  the  commercial 
interests  of  the  country.  These  reforms  do  not  come  from 
the  people  up  to  the  government,  but  have  originated  in  the 
government  itself,  and  the  untried  leaders  of  the  party  at- 
tempted to  engraft  these  ideas  inspired  in  Washington  into 
party  platforms. 

So  that  we  find  in  republican  platforms  a  demand  for  the 
government  to  regulate  and  control  the  greater  business 
ventures  of  our  citizens,  and  investigate  and  regulate  business 
with  a  view  of  preventing  capital  from  receiving  any  specula- 
tive benefits  from  investments,  and  restrain  them  to  a  rate 
of  interest  which  would  be  satisfactory  to  the  people. 

Now  the  men  who  insert  that  trash  in  either  the  re- 
publican or  democratic  platforms  are  socialists  and  do  not 
appear  to  be  aware  of  the  fact.  The  advocacy  and  defense 
of  the  administration's  mistakes  in  this  matter  on  the  part 


226  SOCIALISM  OR  EMPIRE. 

of  the  republican  party  placed  the  commercial  and  stock- 
holding class  of  our  community  without  any  party  representa- 
tion and  the  result  was  that  in  New  York  over  twenty  per 
cent  of  the  voters  did  not  vote,  although  Mr.  Root  with  a 
direct  message  from  the  President  called  attention  to  the 
danger  as  he  expressed  it.  The  day  after  the  election  the 
chairman  of  the  republican  state  committee  said,  "I  knew 
all  along  we  had  lost  the  labor  vote,  "but  he  also  must  have 
known  that  he  had  lost  the  vote  of  the  commercial  interests 
as  well,  or  he  was  a  poor  political  manager.  To  the  business 
interests  of  New  York  there  was  little  to  choose  between  the 
two  candidates  for  governor  and  the  result  was  that  350,000 
men  did  not  vote  at  all,  and  if  the  farmers  had  not  turned  out 
at  Mr.  Root's  impassioned  request  and  the  conservative 
democrats  turned  the  scale  against  Mr.  Hearst,  he  would 
surely  have  been  elected.  In  fact  results  show  that  the 
democrats  defeated  Mr.  Hearst,  because  the  balance  of  their 
ticket  was  elected,  not  because  the  175,000  republican  ma- 
jority was  not  present  in  the  state,  but  because  it  did  not  go 
to  the  polls. 

If  the  chairman  of  the  New  York  committee  had  been 
a  student  of  political  thought,  he  would  have  known  that 
if  the  Commercial  interests  were  antagonized  the  best  of  the 
laboring  element  was  also  lost,  because  the  better  element 
of  labor  is  friendly  to  his  employer,  and  is  willing  to  assist 
him  by  his  vote. 

In  this  same  election  Ohio  and  Colorado  went  overwhelm- 
ingly republican,  because  in  Ohio  Senators  Foraker  and  Dick, 
who  were  known  to  be  antagonistic  to  the  so-called  "re- 
forms" of  the  administration,  assured  the  business  com- 
munity and  retained  their  support.  In  Colorado  a  remark- 
able example  was  given,  because  the  administration  admirers 
nominated  a  personal  friend  of  the  President  for  Governor, 
but  as  the  business  element  of  the  state  desired  that  the  action, 
of  the  supreme  court  in  settling  the  labor  troubles,  should  be 
ratified  by  the  people,  it  developed  that  the  Commercial 
interest  controlled  the  Convention.  The  President's  friend 
resigned  from  the  ticket  as  he  thought  it  would  be  out  of  place 
for  him  to  run  on  a  ticket  clearly  controlled  by  the  element 
which  the  President  was  attacking.  During  the  campaign 


CONCLUSION.  227 

it  was  made  plain  that  the  great  corporations  and  the  "state 
builders"  were  in  favor  of  the  republican  ticket,  and  as  a  nat- 
ural result  the  honest  laboring  element  in  the  state  voted 
for  his  own  and  his  employer's  interest,  and  the  most  com- 
plete republican  victory  in  the  state's  history  was  the  result. 

I  was  present  at  Omaha  when  the  Secretary  of  War 
made  his  speech  in  support  of  the  republican  congressman 
from  that  district;  and  firmly  believe  that  his  expression 
which  was  repeated  to  give  it  force,  that  the  President  had 
instilled  the  "fear  of  the  Lord  as  well  as  a  fear  of  the  law"  in 
the  hearts  of  the  corporations  and  threats  of  the  use  of  a 
"big  stick,"  caused  the  defeat  of  the  man  he  advocated. 

There  were  enough  business  men  and  laboring  men  who 
sympathized  with  their  employers  in  that  audience  who  de- 
cided that  if  the  administration  needed  this  man  to  assist 
it  in  such  an  endeavor,  that  it  was  better  to  send  the  other 
man,  and  the  republican  was  defeated. 

The  reform  laws  singling  out  corporate  subscriptions  to 
party  success  and  making  it  a  criminal  offence  is  not  only 
unconstitutional  but  it  is  cowardly.  A  socialist  would  be 
warranted  in  such  an  action,  but  it  should  be  beneath  any 
American's  idea  of  right.  It  is  proposed  to  create  an  agi- 
tation clearly  intending  to  destroy  corporate  interests  and  after 
tieing  them  hand  and  foot,  belabor  them  with  a  "big  sitck"  and 
rob  them. 

The  result  in  New  York  should  cause  reformers  to  hesitate, 
because  it  shows  that  a  rich  man  can  do  more  than  a  party 
organization,  if  laws  are  passed  preventing  party  committees 
from  raising  necessary  funds  for  campaigns. 

Mr.  Hearst  certified  to  the  Secretary  of  State  that  he 
had  expended  $256,370.00  in  his  effort  to  become  Governor 
of  the  state  of  New  York,  If  he  had  been  successful  he 
could  work  with  some  good  "trader"  in  the  stock  market, 
and  engineer  a  "bear"  movement  on  certain  corporate  in- 
terests; then  bring  drastic  action  and  reap  financial  profits 
footing  into  the  millions  and  the  public  would  be  no  wiser. 

Caesar  spent  millions  in  entertaining  the  "common 
people"  before  he  reached  the  goal  which  enabled  him  to 
rob  the  rich  of  their  money  and  the  poor  of  their  liberty; 
and  while  he  was  spending  his  money  he  proclaimed  him- 


228  SOCIALISM  OR  EMPIRE. 

self  a  Democrat.  The  people  should  credit  a  man  who  has 
the  nerve  to  spend  such  a  sum  in  politics,  with  ordinary 
common  sense  and  know  that  such  expenditure  does  not 
indicate  philanthropy. 

The  commercial  interests  should  be  allowed  to  protect  them- 
selves, and  being  smaller  in  number  increase  their  influence 
by  the  use  of  money.  Remember  it  was  but  a  scratch  that 
prevented  money  from  having  all  the  vote  in  this  country, 
and  it  is  out  of  place  for  a  democracy  to  attempt  to  take 
away  such  privileges. 

The  results  of  this  fall's  election  show  that  we  have 
started  a  political  drift  towards  socialism,  that  should  be 
checked  by  conservatives  in  both  parties  uniting. 

If  it  is  the  desire  of  socialism  that  the  government  oper- 
ate all  of  the  business  of  the  country  and  that  no  man  should 
be  better  paid  or  better  off  than  his  fellow,  and  that  the  most 
ignorant  citizen  should  have  as  much  to  say  in  government 
as  the  ablest;  it  is  well  to  have  the  expression  placed  in  their 
platform  and  every  man  who  holds  that  belief,  vote  for  it. 
Let  him  vote  the  socialist  ticket  and  be  done  with  it. 

If  the  democrats  believe  in  free  trade,  states'  rights, 
and  that  all  the  laws  should  be  passed  in  the  interest  of  the 
poor  or  as  they  express  it,  "the  greatest  good  to  the  greatest 
number,"  it  is  right  to  put  it  in  their  platform. 

But  the  party  leaders  who  place  expressions  in  a  demo- 
cratic platform  favoring  ownership  of  public  utilities,  control 
of  railroads  and  regulations  of  trusts  are  practicing  a  deceit 
on  their  followers  who  do  not  study  political  conditions, 
and  are  leading  them  into  socialism. 

The  republican  who  advocates  that  the  government 
should  regulate,  control  and  investigate  private  owned  in- 
vestments with  an  avowed  determination  of  limiting  the 
profits  to  a  certain  percentage  to  be  determined  by  political 
parties,  or  the  "people,"  is  adopting  socialism  in  an  indirect 
form. 

There  is  no  difference  between  a  seizure  of  profits  and 
a  robbery  of  property.  The  only  object  in  the  ownership 
of  property  is  to  receive  the  benefits  in  the  form  of  profit. 

Unless  some  of  the  parties  now  in  existence  take  the 
conservative  side  in  this  issue,  and  attract  to  itself  the  great 


CONCLUSION.  229 

commercial  interests,  socialism  will  be  an  assured  fact,  or 
the  hardship  of  a  financial  panic  be  necessary  to  bring  the 
people  back  to  reason. 

About  thirty  percent  of  our  people  are  engaged  in  com- 
mercial pursuits  or  belong  to  the  stockholding  class  of  citi- 
zens and  through  their  employment,  friendship  and  assist- 
ance to  laboring  men  influence  over  fifty  per  cent  of  the  vote. 
But  through  the  extraordinary  action  of  party  "bosses" 
(and  the  "reformer"  is  the  most  strenuous  boss  of  all)  all  of 
this  majority  of  voters  is  left  with  no  party  representation. 

The  majority  of  the  people  do  not  believe  in  these  reforms 
proposed  and  the  fall  elections  prove  it  conclusively. 

Are  we  to  drift  to  socialism,  which  builds  up  a  tyrannical 
power  in  the  executive,  like  that  of  New  Zealand,  where  the 
property  of  the  landed  proprietors  was  seized  by  the  state 
within  the  past  twenty  years,  or  that  more  savage  tyranny 
which  was  developed  in  France  only  a  little  over  one  hun- 
dred years  ago,  that  destroyed  all  property  rights? 

Or   are  we  building  up  a  power  in  our  Executive  De 
partment  so  strong  and  comprehensive  that  some  ambitious 
man  when  President  will  cast  the  precedent  aside  established 
by  Washington,   and  assume  to  rule  not  only  eight  years, 
but  a  lifetime  ? 

If  these  proposed  regulative  laws  are  established,  so  great 
a  power  will  be  centered  at  Washintgon,  that  millions 
could  be  made  by  the  proper  interpretation  of  a  "nod"  or 
"wink"  and  fortunes  "regulated"  out  of  existence  in  a  day. 

If  we  cut  loose  from  our  constitutional  moorings  which 
have  bound  us  to  individual  liberty  and  personal  rights, 
we  cannot  fail  to  drift  toward  the  sands  of  Socialism  or 
the  rock  of  Empire ;  there  is  no  open  channel  between  these 
danger  points. 


THE  LIBRARY 
UNIVERSITY  OF  CALIFORNIA 

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